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When Mario Monti became the European Union’s competition commissioner in 1999, his predecessor had already laid the groundwork for the overhaul of merger control and the most comprehensive reform of EU antitrust law since 1962. Lawyers credit the 61-year-old former economics professor — along with right-hand man Philip Lowe, whom Monti put in charge of the competition department of the European Commission, the EU’s executive agency, in September 2002 — with making the reforms a huge success. This autumn, Monti will end his five-year term as competition commissioner, during which he fought France over government handouts to Alstom SA and France T�l�com SA, incurred the wrath of many by opposing the merger of General Electric Co. and Honeywell International Inc. and sought to restore the commission’s credibility after a series of stinging court defeats. Monti fell victim to machinations within Italian Prime Minister Silvio Berlusconi’s ruling coalition. Berlusconi last week nominated European affairs minister Rocco Buttiglione to replace Monti as Italy’s representative on the new commission, which will take office in November. While it is considered highly unlikely Buttiglione himself will inherit the prestigious competition dossier, it is certain that whoever does will have a tough act to follow. On the merger side, dismantling the all-powerful Merger Task Force, restructuring the competition department according to sectoral specialties and especially appointing a chief economist were all very much Monti-driven initiatives, noted Trevor Soames, a Brussels-based partner at Howrey, Simon, Arnold & White. “It’s under his guidance as captain that this has all happened,” Soames said. By itself, eliminating the Merger Task Force — the lawyers and economists who had been charged with vetting all mergers — was a daunting task, but it was one from which the somewhat deceivingly soft-spoken Monti did not shy away. “Whether you think it was unfair or not, it required huge political courage,” said Soames. In the task force’s place Monti installed a number of internal checks and balances designed to ensure that regulatory decisions are based on solid evidence and more firmly grounded on economics — as evidenced in the decision to give the green light to Sony Music’s merger with Bertelsmann AG’s BMG division without concessions. The about-face came after the commission’s case failed to pass muster with an internal “devil’s advocate panel” — an informal process in which officials not involved in a case look over the file with a fresh set of eyes — and the commission’s own chief economist, Lars-Hendrik R�ller. That’s not to say Team Monti has always backed down. Consider, for example, the commission’s recent record �497 million ($604 million) fine against Microsoft Corp. after concluding the company abused its dominance in personal-computer operating systems, and its continued pursuit of France for giving handouts to ailing state-owned companies such as engineering company Alstom. The regulatory reform effort gained a new sense of urgency following a trio of high-profile appellate court defeats in 2002. Over a four-month period, the Luxembourg-based European Court of First Instance knocked down the commission’s vetoes of Airtours plc’s £850 million ($1.6 billion) bid to buy First Choice Holidays plc; Schneider Electric SA’s takeover of Legrand SA; and packaging company Tetra Laval International SA’s �1.7 billion buy of French rival Sidel SA. That Monti inherited the Airtours dossier from his predecessor Karel van Miert made no difference. Monti’s first decision as commissioner in the fall of 1999 was to reject the deal — and Monti was the one who had to answer to the court’s criticisms on that and the other cases. Rather than put up a stubborn fight, Monti looked on the defeats as a challenge to restore the commission’s damaged credibility. He did so by fine-tuning the reforms that were well in progress. “Our record in the merger area is less than glorious after these three court rulings,” Monti told journalists about a week after the third defeat. “But I’m not going to stand and let our world-class reputation that the commission acquired in the last decades be washed out like this.” The EU’s new merger rules and reform of its 40-year-old antitrust rules went into effect May 1, the same day it admitted 10 new member states. The latter set of reforms gives member states greater responsibility in policing cartels and other antitrust violations. In his own words, Monti would have been fully prepared to stay on in the job, or to serve in another capacity on the commission, to “carry on with determination my commitment for a more open and competitive European economy.” Berlusconi had other ideas, however, tapping Buttiglione to fill Italy’s seat on the new commission. Showing no evidence of bad will, Monti called Buttiglione to congratulate him and wish him well. That kind of graciousness was fully in character for the former academic, who is known for being a good listener, for his rationality and for taking his job seriously. Monti clearly does have a sense of humor, but he rarely if ever speaks without notes, perhaps a reflection of his background as a professor. This is not necessarily a bad thing; his predecessor often got himself into trouble by speaking off the cuff. Monti has “been very good at steering his course and trying to adapt to new situations as they come up,” said Jane Golding, a partner at Crosby Renouf in Brussels. “He has taken on board some of the criticisms the court has made and tried to do something about it. Whether he has always reacted in the right way is obviously open to debate, but he’s not afraid to make changes.” Competition lawyers say that, almost paradoxically, Monti will be remembered both as the killer of GE’s $47 billion bid for Honeywell after Washington approved the deal, and for improved regulatory relations with the U.S. They credit Monti with increasing EU-U.S. cooperation in antitrust cases by better coordinating merger-review timetables. GE/Honeywell was merely a “blip on a road of increasing convergence and discussion,” noted Howrey Simon’s Soames. Copyright �2004 TDD, LLC. All rights reserved.

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