BIICL Conference London, 24 November 2006

1
BIICL ConferenceLondon, 24 November 2006

• Championing National Or European Interests?
• Merger control and the integration and
  liberalisation of markets in the EU
• Nadia Calviño
• Deputy Director-General, DG Competition, European
  Commission

2
Overview

• Open, competitive markets are key drivers for
  growth in Europe Internal Market provides
  opportunities for expansion and prosperity
  Lisbon Agenda designed to accelerate this
  process.
• Integration of markets implies that industrial
  restructuring can take place across national
  borders.
• Competitive process requires that industries can
  restructure as they see fit including by
  changes in ownership.
• European industry is seizing these opportunities
  and integrating at EU level and worldwide. Is
  there a Europeanisation of EU industry? What is
  a national champion?

3
EU cross-border mergers

• Trends in EU cross-border mergers
• ECMR filing statistics over 2/3 mergers notified
  to Commission in 2000-2005 period were not
  domestic (between firms within one Member
  State)
• Geographical source of company revenues over 50
  from home markets (within one Member State) in
  1997 less than 40 in 2005
• Marked increase in cross-border mergers in
  network industries (telecoms, transport postal
  and energy sectors).

4
Merger control in regulated markets

• Important role of competition policy in the
  liberalisation of the Telecoms markets.
• Ongoing liberalisation in the energy market
• - EU regulatory process 2003 gas and
  electricity directives.
• - Absence of real european energy markets
  outstanding national regulations and market
  structures.
• Accelerating process of cross-border energy
  mergers Commissions sector enquiry
  Preliminary report identifies market
  concentration (national markets with strong
  incumbents vertical integration) as major
  concern.
• merger control can facilitate energy market
  liberalisation by
• ensuring that horizontal concentration does
  not impede effective competition by strengthening
  incumbents
• ensuring that vertical integration does not
  impede effective competition by foreclosing
  access to national markets

5
Energy mergers horizontal and non-horizontal
effects

• EFFECTS
• Unilateral effects, eliminating both
• Actual competition (EDF/Suez (2006))
• Potential competition (EDF/ENBW
  (2001)EDF/ENI/GDP (2004))
• Coordinated effects (VEBA/VIAG (2000))
• Input foreclosure (EDP/ENI/GDP (2004) Eon/MoL
  (2005) GDF/Suez (2006)).
• Customer foreclosure (EDP/ENI/GDP (2004))
• REMEDIES
• Traditional remedies divestiture of
  production/distribution assets severing of
  ownership/supply links between competitors
  gas/contract releases
• Ownership unbundling remedies (i.e. structural
  separation into unaffiliated entities) objective
  is to achieve vertical separation, thereby
  contributing to market liberalisation examples
  Eon/MoL DONG/Elsam/E2 GDF/Suez

6
National or European Champions?

• Merger wave Increasing numbers of transnational
  mergers.
• EC merger control does not impede creation of
  European/global firms but aims at protecting
  effective competition productive efficiency and
  consumer welfare.
• Complex assessment in regulated markets
  Concentrated structure, vertical integration,
  barriers to entry The absence of an internal
  market.
• Merger control is a powerful tool for reinforcing
  integration and liberalisation of EU markets but
  it is not the only one.
• The Commission has played a relevant role in
  liberalisation of regulated markets (telecoms,
  rail, postal).
• The need for an integrated European energy
  policy Creation of a single market.