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Sunday, 5 February 2012

State aid and merger control

Competition Commissioner, Joaquin Almunia, took the opportunity of the European Competition Forum to announce reform of the Commission's procedures for state aid control (the speech is here: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/59 ). This was presented, partly, as part of the bigger picture in relation to new rules on budgetary surveillance and control, and consistent with it. The Commissioner is looking for better prioritisation of enforcement activity and he singled out subsidised network industries, publicly supported incumbents in liberalised markets, and selective tax advantages for particular attention. He also wanted better powers for the Commission to act on its own initiative. There was also promise of procedural reform and rationalisation of the myriad amounts of guidance, with the treatment of cross-subsidy being singled out. More detail will be provided in a Communication sometime before the summer.

Simplification of the rules and speeding up of the procedures would be improvements in themselves but I would have preferred them sooner, given I have to write a second edition of a textbook based on the old ones. Whether substantive reform of the policy can get anywhere, and will be better, is a much more open question.

At the same time, the Commissioner announced that he had blocked the proposed merger between Deutsche Börse and New York Stock Exchange – Euronext (further details here: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/12/52&format=HTML&aged=0&language=EN&guiLanguage=en ). This is only the second time that he has blocked a merger and one of only four prohibition decisions since 2002. The justification given was that, "If allowed, the merger would have resulted in a quasi-monopoly in exchange traded financial derivatives based on European underlyings [presumably underlying assets], where the two companies control more than 90% of the global market." It is interesting that this is presented as a straightforward horizontal merger, the anticompetitive effects of which could only have been solved by the companies concerned divesting sufficient assets to create a viable competitor. Although both companies strongly disagree with the Commission's decision, there is no sign that they will challenge it (see: http://deutsche-boerse.com/dbag/dispatch/en/listcontent/gdb_navigation/investor_relations/Content_Files/press_120201.htm?teaser=Pressaddress1February and http://deutsche-boerse.com/dbag/dispatch/en/listcontent/gdb_navigation/investor_relations/Content_Files/press_120201.htm?teaser=Pressaddress1February ).

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