The Regulatory Muscles From Brussels
It was a blunt warning. European Competition Commissioner Karel Van Miert was testifying to the European Parliament on Feb. 5 about the proposed merger of the world's second-largest accounting firm, Ernst & Young, with KPMG Peat Marwick, its closest rival. The combined firm would have had 40% of the European market and 36% of the market worldwide, and Van Miert was concerned that the firms' clients would not be left with enough choices of auditors. "We received several complaints" from customers, Van Miert says. "There were large problems we had to investigate."
The Commission agreed to launch a five-month investigation--and that was enough for Ernst & Young to scuttle the planned megamerger. The giant auditing firms are in good company: These days, some of the biggest U.S. corporations are finding the EC a surprising roadblock to global consolidation plans. FAN CLUB. Manning the barricade is Van Miert, the top trustbuster in Brussels. He has held up the long-attempted linkup between British Airways and American Airlines, and he's now looking at links between KLM Royal Dutch Airlines and Northwest Airlines, Lufthansa and United Airlines Inc., and the agreement among Delta Air Lines, Austrian Airlines, Sabena, and Swissair. He's also reviewing the planned Price Waterhouse-Coopers & Lybrand merger. Last summer, the 55-year-old Van Miert succeeded in forcing Boeing to give up its exclusive 20-year deals with airlines to win approval for its merger with McDonnell Douglas Corp. "We had trouble telling the Americans that we had the right to investigate" that case, says Van Miert. "But it's normal that we look into the effects of a merger on a market."
Surprisingly, the activist antitrust chief has a number of fans in Corporate America. "Instead of having to go to half a dozen or more different antitrust reviews in every European country, more and more companies can get by with only one," says David Chijner, an antitrust specialist at the New York-based law firm Weil, Gotshal & Manges. "And the reviews generally are quick and efficient." Van Miert's crusade to open up markets such as telecom, aviation, and energy also has earned him fans at companies such as Enron and Ameritech. "Van Miert is the most pro-competition person in Brussels, opening up all sorts of opportunities for American business," says David Burnett, an economic officer at the American Mission to the European Union.
That's quite an accomplishment for a Belgian farmer's son who made his name as chairman of the Flemish socialist party. Van Miert joined the EC as transportation commissioner in 1989, and when he took over the antitrust portfolio in 1993, expectations were low. "People didn't expect this socialist to be a vigorous free-marketeer," says Alexandre Mencik, a partner at Squire, Sanders & Dempsey in Brussels.
But Van Miert had gradually developed an aversion to monopolies. "When I was involved in Belgian politics, I was a privileged witness to the dangers of monopolies," he says. He became fed up, he says, with the high prices and poor service of Belgium's airline, Sabena, and Belgacom, its telephone company.
Van Miert began deregulating airlines as transportation commissioner and is still on the case. "Airlines are one of our most sensitive areas," he says. His reach now extends to industries from European soccer to ice cream manufacturers.
When the KPMG-Ernst & Young deal was proposed last October, Van Miert was immediately skeptical and put his troops to work evaluating the deal. "They asked our clients what they thought of the plan, and they asked us what our profits were on individual audits," complains Jan De Dekker, a partner at Ernst & Young's Brussels office. Ultimately, Ernst & Young deep-sixed the plan. "The likelihood of regulatory approval was dimming," says Philip Laskawy, Ernst's chairman.
HEAVY HAND? Critics say Van Miert sometimes blocks deals more for political than competitive reasons. During last summer's dogfight over the Boeing-McDonnell Douglas merger, some said he was mainly fighting to support Europe's Airbus Industrie. "Boeing-McDonnell Douglas represents a grave threat to Airbus, which represents just about the only real pan-European success story," says Weil, Gotshal's Chijner.
Some airlines see a heavy hand in Van Miert's approach to the British Airways alliance with American Airlines, which he has held up for more than 18 months. Van Miert insists that BA give away slots at London's Heathrow Airport to make way for low-fare startups. "This slot war has nothing to do with antitrust law and everything with politics and interventionism," argues Stephen Kinsella of the British law firm Herbert Smith. But Van Miert says that in both the Boeing and BA deals, he simply has been making sure dominant players cannot become monopolists.
The antitrust chief says he has already improved transatlantic antitrust cooperation. For example, he joined the U.S. in forcing Microsoft Corp. to commit to a consent decree in 1995 and is backing the Justice Dept.'s increasingly aggressive look at the company. And he is preparing to stop a German digital-TV deal between broadcasters Bertelsmann and Kirch that would lock up the German TV market. "That will help Hollywood," says the American Mission's Burnett.
Van Miert, whose term expires at the end of 1999, has been mentioned as a potential candidate for EC president. But he insists that his next move is out to pasture--literally. "I would like to return to my farm and do some more gardening," he says. Still, after shaking up businesses on both sides of the Atlantic, it's hard to imagine Van Miert back on the farm.