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In a little more than a year, European Union Commissioner for Competition Mario Monti has gone from being seen as being a rookie to a lean, mean antitrust machine. His first decision, in the fall of 1999 — the rejection of U.K. tour operator Airtours PLC’s proposed buyout of rival First Choice PLC — made a big splash. And antitrust experts agree the ripples have been radiating since. But the jury is still out on Monti’s place in history. Do the headline-grabbing decisions of the past year reflect new-found muscle Monti brought to the job? Or was it simply that the European Commission came of age in 2000, dealing with types and volumes of M&A transactions unheard of previously? The Commission handled only 12 cases in 1990, the first year it ruled on antitrust matters. The number soared to 300 this year. “Merger control tends to be a bit tentative in early years,” said Bill Bishop, chairman of the Brussels office of U.K.-based economics consultant Lexecon Ltd. “Then, after a while, authorities become accustomed to how much power they have and more competent in their judgment.” Yet some experts believe that Monti, a well-coiffed Italian, deserves his nickname, Super Mario. Days after assuming office, Monti blocked Airtours’ proposed buyout of First Choice, creating speculation that this was a taste of a stricter regulation to come. But the ruling was originally scheduled to be announced by Monti’s predecessor, Karel Van Miert, whose staff had already done the work on rejecting the deal. Van Miert had to leave his post early when the agency’s 20 commissioners resigned en masse after allegations of cronyism and corruption. “I don’t think that there’s been any change in policy to the extent that the work we do has remained consistent,” said a senior member of the Commission’s merger task force. “At the end of the day, what we have to do is the same as we did before.” The same may apply to several merger rulings in the first months of Monti’s term. “It just happened that when Monti took over, some important cases were already in the pipeline,” said the EU official, referring to the Commission’s decision in March to block Volvo AB’s $7.4 billion buyout of rival Scania AB. The Commission had also been preparing for a double-whammy veto until Alcan Aluminum Ltd. and Pechiney SA abandoned their merger to avoid a formal regulatory veto. That deal was part of a three-way tie-up linking Alcan with Switzerland’s Alusuisse Lonza Group. Some at the Commission would go a step further to counter the image of Monti as antitrust superhero. “He doesn’t take particular pleasure in blocking mergers,” another Commission official said. Monti, in fact, has been known to bend over backward, even “stretch” some of the Commission’s normally stringent merger rules, to accommodate companies. In the recent merger of Vivendi SA, Vivendi’s Canal Plus SA and Seagram Co., the Commission accepted a last-minute offer by the companies to divest its 22.7 percent stake in British Sky Broadcasting PLC, thus averting a detailed competition probe that would have extended the regulatory review by four months. Normally, the Commission only accepts divestment offers until the end of the third week of the preliminary one-month review period. But Vivendi Chairman Jean-Marie Messier swept into Brussels the day before the Commission was set to open a detailed probe, nearly six weeks into the EU’s investigation, and put BSkyB on the negotiating table. Others at the Commission argue that Monti did not give in, but got what he wanted. The Commission had identified BSkyB at the outset, and preferred to take the stake when it was offered, rather than launch a labor-intensive detailed probe. The Vivendi deal highlights the varying perceptions about Monti’s role in antitrust regulation in Europe. The perception that the Commission is now tougher may be a product of the growing number, size and complexity of deals, some competition lawyers say. “The situation has become more complex,” said Jacques Steenbergen, partner of Belgian law firm Loeff Claeys Verbeke. “Deals tend to raise more difficulty than before.” This year, there have been some of the biggest deals ever — such as the $130 billion marriage of America Online Inc. and Time Warner Inc., which secured European Union regulatory clearance in October — and some of the biggest asset sell-offs — such as Alcoa Inc. and Reynolds Metals Co.’s divestment of a stake in an Australian refinery in May. That disposal, valued between $1.5 billion and $2 billion, was the second-largest ever as a condition of a merger review, following the asset disposals tied to the approval of Exxon Mobil Corp. in 1999. Steenbergen, like many lawyers, does not seem to think the perceived toughness is a direct result of Monti. The former economics professor’s staid manner is certainly a change from that of his animated predecessor, lifelong politician Van Miert. But the past year’s decision-making has been “a process that’s been in the air for some time,” he said. The Commission in 2000 tackled unfamiliar markets, particularly in Internet and high technology. “I have a strong belief because the Commission has no long-standing experience in working with market segments like the Internet, it was more conservative or more strict in applying its market analysis,” said Christoph von Einem, partner with German law firm Haarmann Hemmelrath in Brussels. Certainly, market players who took part in the review of AOL-Time Warner complained of the Commission’s ignorance of the markets. One consequence of the Commission’s lack of understanding may have been more pressure on the companies to furnish more information than normal. EU officials in “cases like Warner AOL were challenged throughout the procedure to really understand the industry, not only today but how the industry may change in the future,” von Einem said. Another prime example is the failed merger of WorldCom Inc. and Sprint Corp. When the Commission launched a full probe in February, it cited several concerns over the deal’s effect on competition. But during its detailed enquiry, the Commission focused on the merger’s impact on competitive access to the Internet’s infrastructure backbone. The case highlighted a key trigger in EU merger reviews: When any doubts exist about a deal’s impact on competition, it cannot be sanctioned. With deals now taking place in uncharted markets, more burden has been placed on companies to convince regulators in reviews of the surrounding competition. One factor that has forced the Commission to be more vigilant is more market concentration. “What’s also been unprecedented, along with the Commission’s perceived toughness, is the increasing toughness worldwide, the reduction of players worldwide,” said Romano Subiotto, a partner at Cleary Gottlieb Steen & Hamilton. “And the question becomes, are we arriving at the number of players that will still preserve consumer welfare?” One reason the Airtours-First Choice ruling raised eyebrows was because of the arguments upon which the Commission relied. One key principle which formed the backbone of the EU’s argument was that of collective dominance. The Commission feared that the deal would reduce the number of U.K. tour operators from four to three, and could not approve it on these grounds. While the Commission has successfully argued its case of collective dominance in previous merger decisions (Gencor and Lonrho in 1996 and Kali and Salz in 1998), it had always been on the basis of a duopoly, and never before applied that principle to the reduction of three players as in First Choice-Airtours. That principle was extended even further, when the Commission launched a full probe into the $20 billion music joint venture between Time Warner Inc.’s Warner Music and EMI Group PLC. The Commission argued then that that deal would reduce the number of players to four — Time Warner/EMI, Seagram’s Universal Music Group, Bertelsmann Music Group and Sony Music — controlling 80 percent of the market. In the EU, where the Commission consults with market players to test concessions in merger reviews, the high-profile nature of deals has also forced third-party complainants to become more sophisticated themselves. “I think [regulators] are more nervous about getting it wrong,” a Brussels-based lawyer said. That view, perhaps, sums up Monti’s legacy in 2000 as the Commission worked through an incredibly diverse antitrust workload. Whether the rulings themselves are considered seminal, however, remains. “Already once in recent years we had had the impression that this was the year of the biggest deals,” Steenbergen says. “But I’m not a great believer in the end of the world.” RELATED CHART Sign of the Times: A look at some of the deals that came before the EU in 2000. Copyright (c)2001 TDD, LLC. All rights reserved.

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