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June 19, 2001

U.S. Businesses Turning to Europeans for Antitrust Help

By ANDREW ROSS SORKIN

American companies intent on preventing rivals from merging are increasingly complaining to European regulators in preference to more permissive officials in the United States.

In the most striking example so far of the Europeans' newfound power over businesses based in the United States, General Electric's planned $45 billion acquisition of Honeywell International may be scuttled by European regulators in spite of approval for the deal in Washington.

G.E.'s domestic rivals, including United Technologies of Hartford and Rockwell International of Milwaukee, have taken the lead in lobbying European regulators in Brussels to block the transaction. John F. Welch Jr., G.E.'s chief executive, flew to Brussels last week to defend his case.

The Europeans' jurisdiction in cases involving American businesses is far reaching: generally an American merger that would result in a company with more than $225 million in annual revenue from Europe falls under the domain of the European competition commissioner, Mario Monti.

Other American companies, like Walt Disney and Sun Microsystems, have pressed the Europeans to investigate mergers and other possibly anticompetitive practices by their domestic rivals. Disney successfully pushed the Europeans to force AOL to make important concessions in its $165 billion acquisition of Time Warner. Sun Microsystems successfully lobbied the European Commission, the executive arm of the 15-nation European Union, to investigate Microsoft's dominance in software for computer servers.

Complaints by Advanced Micro Devices, a computer chip maker, helped persuade the Europeans to investigate the marketing practices of Intel, the world's leading producer of computer microprocessors.

GTE successfully helped push the Europeans to block the planned $130 billion purchase of Sprint by WorldCom. That deal was rejected, too, in Washington, but only after the European Commission ruled that the merged company could not do business in Europe.

Related Articles

G.E. President Sees Little Chance of Completing Honeywell Acquisition (June 19, 2001)

Europe Officials Appear to Bend Some on G.E. Deal (June 19, 2001)

Europe Seems More Open to G.E. Merger (June 12, 2001)

Bush Picks Critic of Clinton Antitrust Policies to Lead F.T.C. (March 22, 2001)

Seeking a Common Rule Book for International Mergers (Jan. 28, 2001)

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And American companies may now be even more likely to take their complaints of unfair competition to European officials, executives and lawyers say, because of their perception that under President Bush, the Justice Department and the Federal Trade Commission are less likely to press antitrust issues than in the Clinton administration.

"If you are a competitor, you want to go where you will get a sympathetic hearing," said Glenn B. Manishin, an antitrust lawyer at Patton Boggs in Washington, who has brought several complaints to European authorities. "And given the signal George W. sent by appointing Timothy Muris to run the F.T.C., the preference is to go to the E.U. first." Mr. Muris, who had been a top antitrust official in the Reagan administration, is expected by specialists to take a less aggressive approach in prosecuting monopoly cases.

Worried that their deals could be quashed by regulators in Europe, American executives are making their own pre-emptive pilgrimages there. A. G. Lafley, Procter & Gamble's chief executive, and Douglas N. Daft, Coca-Cola's chief, recently went together to Brussels to explain their new joint venture to sell snacks and juice and fruit-flavored drinks.

The Europeans have stepped up their policing of corporate behavior under their competition commissioner, Mr. Monti, a Yale-educated Italian economist. Mr. Monti helped kill the WorldCom-Sprint deal and effectively forced Time Warner to abandon the acquisition of EMI, the big music group.

Yesterday, he assailed G.E. for trying to use political pressure and accused the company of spreading misinformation, even as the commission seemed to be inviting a compromise.

Mr. Monti, a supporter of vigilant antitrust enforcement, and his European colleagues have more power than regulators in the United States. His 60-member office is a branch of the European Commission, and the parent European Union almost always approves its recommendations. Unlike American agencies, the commission can block deals without going to court. To appeal a ruling, companies must petition the European Court of Justice in Luxembourg, which is regarded as an ally of the commission.

The agency has regularly taken on American companies and their deals with scant attention to the position of United States government officials. That latitude has alarmed American chief executives and politicians alike. "The European regulators' demands exceeded anything I or our European advisers imagined," Mr. Welch of G.E. said last week, "and differed sharply from antitrust counterparts in the U.S. and Canada."

President Bush told reporters in Warsaw on Friday that he was concerned by the commission's opposition to the deal. "I am concerned that the Europeans have rejected it," he said, noting that administration officials had brought the case up with officials there.

Only rarely has foreign political pressure forced the commission's hand. In 1997, the Clinton White House threatened trade sanctions when the commission prepared to block the planned acquisition by Boeing of McDonnell Douglas. The Europeans relented after imposing strict conditions for their approval of the transaction.

Although Mr. Monti has talked about cooperating and harmonizing antitrust controls between Europe and the United States, the two seem to work less and less in tandem.

European regulators continue to press their investigation of Microsoft's server software, while the Bush Justice Department has yet to take a position on Microsoft's federal court appeal against District Judge Thomas Penfield Jackson's order to break up the company, a case vigorously pursued by Clinton officials.

The Europeans' case against Microsoft has been supported in large part by testimony from Sun Microsystems, a producer of advanced computer servers and programming language and an important rival of Microsoft, which has sent lawyers to Brussels to pursue accusations of anticompetitive behavior.

In cases where American regulators seem likely to reject a deal to protect consumer interests, the Europeans often value the protection of competing companies, antitrust lawyers say. As a result, European Commission officials rely much more on feedback from rival companies than agencies in the Unites States do, giving the American petitioners another powerful forum. Even in cursory reviews, the Europeans ask competitors that could be affected by a deal to submit opinions.

Mr. Monti dismisses the notion, advanced by his corporate targets, that the commission's approach drives it to block deals unfairly on behalf of rivals. "We are sufficiently non-nave," he said at a meeting of the American Bar Association in March, "as to be able to discount the elements provided by competitors for their vested interests. Competitors are a rather powerful source of overall assessment of mergers and potentially for the identification of remedies."

The European stance against a company's use of a strong position in one market to achieve dominance in another tying, or bundling, as the practice is called is also considerably tougher than the posture of American regulators, some lawyers said. The European Commission worries that G.E.'s aircraft-leasing company, the world's largest, could decide to buy only Honeywell avionics for its jets, or that G.E. could use its strong jet engine business to bolster sales of Honeywell avionics, shutting out competitors like United Technologies and Rockwell.

Complaints from American companies do not always succeed. Last year, Lockheed Martin protested against Boeing's acquisition of the satellite business of Hughes Electronics. The objection pushed European officials to extend their investigation into the deal, but in the end, it was approved without any concessions. In fact, it was the Federal Trade Commission that forced the companies to make some compromises.

Nor have European Commission officials avoided troublesome deals at home. A year ago, objections by Mr. Monti forced Sweden's two big truck manufacturers, Volvo and Scania, to abandon plans for a $7 billion merger.

Still, American executives seeking to block their rivals' deals count on a European willingness to intervene. As Peter Thonis, who led GTE's public relations and policy office as the company lobbied in Europe against the WorldCom-Sprint merger put it, "Where you have a global enterprise, even if you're American, the Europeans play a big role."


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