The Free Market Enforcer Who's Shaking Up Europeby
With unification just around the corner, the European Community decided last year that it needed strong antitrust rules so the free market could prevail. The EC got the rules. But it got something else it didn't bargain for: Sir Leon Brittan, a trustbuster extraordinaire.
In recent months, zealous enforcement by the EC's competition czar has shaken boardrooms from Milan to Manchester. The 52-year-old British barrister is using his lawyer's savvy to push antitrust regulations to the limit. He's attacking everything from anticompetitive takeovers to unfair subsidies and price-fixing cartels (table). Brittan's mission is clear: force Europe to shed its protectionist ways. And now, the addition of the seven European Free Trade Assn. (EFTA) nations in the EC sphere is bound to fuel more of Brittan's free-market thinking, giving his high-gear campaign extra significance.
But Brittan, who comes up for reappointment as commissioner at the end of 1992, faces a tremendous backlash. Big fights loom over the fate of such monopolistic untouchables as steel, telephone service, and energy. Powerful corporations are plotting counterattacks. His ability to withstand the political firestorm could decide whether Europe's economic future will be as a free market or as a fortress for monopolies. That outcome will also determine Europe's ability to compete with the U. S. and Japan in coming years, Brittan believes.
STRONGHOLDS. In early October, Brittan wielded the year-old EC merger rules for the first time against big, state-owned protectionist strongholds. He nixed the proposed $200 million joint takeover of Canadian commuter-aircraft builder De Havilland by France's state-owned Aerospatiale and Italy's Alenia, arguing that the deal would give them two-thirds of the European market and would risk rubbing out competitors such as Holland's Fokker. The companies are fighting back by planning to become minority stockholders in De Havilland.
Sweet deals with governments are high on his hit list. He is investigating an Italian plan to give $2.8 billion in government handouts to Fiat to build a new auto plant at Melfi, in the depressed Mezzogiorno area. And British Aerospace PLC was ordered to repay a $75 million sweetener that he says it received from the British government to buy nationalized auto maker Rover
Group PLC. By taking that action, Brittan was enforcing a rule he devised that requires governments in business dealings to act the way reasonable shareholders in a private company would.
Brittan is also enforcing higher standards of corporate behavior by attacking anticompetitive practices such as price-fixing. He ordered raids on papermakers, including Germany's Feldmuhle, that were suspected of price-fixing, and Sweden's Tetra-Pak was fined $90 million for alleged abuse of a dominant position in soft-drink packaging. Procter & Gamble Co. has just been told to change the terms of a joint venture in disposable diapers with Italy's Finaf that would have divided up the EC market.
To the cheers of consumer lobbies, Brittan is going after companies that use exclusive distribution contracts to demand higher prices for the same goods that can be bought for less in neighboring countries. French auto maker Peugeot, for instance, was told it couldn't stop a French wholesaler from buying its cars in Belgium, where they cost less, and reselling them in France cheaper than Peugeot dealers.
And in a complete break with European practice, Brittan is encouraging European companies to step forward and rat on their rivals. That U. S.-style approach could give his campaign its biggest head of steam. France's Matra, for instance, filed a complaint about subsidies promised to Ford Motor Co. and Germany's Volkswagen to build a plant in Portugal.
ENEMIES. Brittan's tactics are becoming as controversial as his aims. Most business deals involving state-held companies are cooked up behind closed doors at national finance ministries. Brittan is demanding that state companies file annual reports listing their state subsidies. Corporate leaders claim this forces them to make public proprietary information.
The result is that Brittan's list of powerful enemies is growing by the day. The French went ballistic when the EC commission backed Brittan's ban on the De Havilland merger. Spluttered transport minister Paul Quiles: "If Brittan had intervened 20 years ago, we wouldn't have had Airbus or Ariane," referring to two successful aerospace consortiums that are heavily subsidized.
The political stakes are so high that even some of Brittan's usual allies are running for cover. Two key EC commissioners are backing Franco-Italian moves to blunt some of Brittan's powers. A proposal to be voted on Oct. 30 would allow any EC commissioner to quash a trust-busting probe in his jurisdiction.
Can the crusader's campaign survive? It seems it will. He has been backed by EC commissioners on all of his moves so far. Even if he's replaced next year, the spirit of the times is running his way. With EFTA members already on board and the old command economies of East Europe and the Soviet Union hammering on the door for admission, Europe simply can't slip back into its old bad habits.