Protectionist Trustbusters?

As the global economy becomes ever more integrated, Europe and the U.S. appear to be taking divergent paths on antitrust policy. Should Japanese, Mexican, or Chinese regulatory officials choose to apply their own distinctive national standards to merging American or European companies that do local business, everyone would face an international babel of antitrust regulations. That could only be bad for investment, capital flows, and competition.

It is, of course, in the name of competition that the European Commission has been scrutinizing the General Electric Co. merger with Honeywell International Inc. European anti-trust policy opposes mergers that result in companies selling an array of goods and services within one industry. The GE-Honeywell deal would result in an aerospace behemoth that offers airline customers jet engines, avionics, and financing in one bundle. The EC worries that smaller, individual European aerospace companies may not be able to compete against such "portfolio power." That such a stance smacks of protecting European companies against U.S. competition doesn't appear to bother the EC all that much.

U.S. antitrust policy focuses on consumer benefits. Vertical mergers, or even near-monopolies such as Microsoft, that benefit consumers pass regulatory muster more easily. The notion is that competitors can take care of themselves in the global marketplace without government help.

In an ideal world, antitrust policy would be coordinated among nations to avoid the Tower of Babel effect. Failing that, the EC and countries around the world should question whether their antitrust policies are truly pro-competitive or are, in fact, a new form of protectionism. In the end, protectionism is just as dangerous in capital markets as it is in markets for goods and services.

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