Jamie Robertson: Welcome back. You've joined World Business Report from the BBC. I'm Jamie Robertson. I'm talking to you from London and Patrick O'Connell is over in New York talking to you from there. Now the transatlantic row over General Electric's frustrated attempt to buy Honeywell rumbles on. On Friday the US President George Bush stepped into the argument. At a press conference with Polish President Aleksander Kwasniewski in Warsaw, Mr. Bush sounded surprised that a deal between American companies and passed by American authorities was now going to be undone by European regulators.
President Bush: Our government looked at the merger and approved it. The Canadian government looked at the merger and approved it. And I am concerned that the Europeans have rejected it. That's all I've got to say on it.
Robertson: A concerned Mr. Bush there talking in Warsaw. Now Patrick what strikes me about this is there's something of a sea change going on in relationships between the US and Europe in terms of what the Europeans want out of competition regulation and what the Americans want, and what is so worrying about it is there are other deals down the road. The European Commission is looking at Intel, at Microsoft of course, away from the background. There are other deals which are going to stir up this kind of hornet's nest.
O'Connell: Yes that's certainly true, and the differences to try to get to grips with have to be .. is the law different down the pike? In other words, if the law on antitrust is stronger in one, let's say the United States, then the initial deal could get done easier, relying on the courts to deal with monopoly questions later, and that's why Microsoft has at the moment been ordered to be split into two. So as you can see, it's a bit complicated within blocks and it is clearly an interesting question now between the blocks as well.
To discuss this further I'm joined by Nicholas Economides, who's Professor of Economics at Stern Business School. Also he was a consultant on the MCI /WorldCom deal which was itself subject to scrutiny by the European Competition Commission. Uh, interesting time for you. This deal was all new, this situation, it seems to us, because it showed Europe reading a different kind of message into a deal approved by the US and Canada.
Nicholas Economides: Yes, the European Union has its own rules, so it has the opportunity to, on its own, object.
O'Connell: Well, it's goo... That's.everyone would want that, wouldn't they, would want one set of rules in one part of the world.
Economides: Absolutely. One would like to have the same rules in different parts of the world.
O'Connell: But imagine, who'd get the right to say whose rules but what are the differences?
Economides: Well, there are a number of differences. One of them is that in the European Union there is much more attention paid to competitors rather than consumers, which is not true in the United States. Another difference is, I guess, one of the events in this case is that there was no local support in Europe for this merger. These were American companies. Another reason is that the European Union, the way it makes its decisions, the commissioner has much more authority than the Department of Justice would have, in that the Department of Justice would have to convince a judge, while the commissioner has only to convince his own co-commissioners.
O'Connell: A judgeI see what you mean. But where does an independent minded person sit on this, because if you say there's no local support, because they were two American companies, that could be construed as some people saying, those nasty Europeans have put the kibosh on an American deal. Or you could look at it from another perspective, that they've been too friendly to them over here. I mean, where's the objective standard on competition?
Economides: Well, every merger needs local support. Some local support. Some country, or a big company in Europe to support it. And this was missing in this deal. There was a lot of American support, and there were some American objections. Companies from the United States were going to the European Union and demanding that it should be stopped . But the politics of the situation are such that you need support on both sides of the Atlantic to be able to make a deal.
Robertson: Mr. Economides, it's Jamie Robertson here in London. Do you get the impression that relations, particularly with the change in government in the US, relations between the antitrust authorities here in Europe and in the US are deteriorating?
Economides: I wouldn't be able to say that. I think the relationships probably are pretty cordial but at the same time each side would like to have the upper hand or the limelight if you want.
O'Connell: I want to get a bit down and dirty before you leave us, because you were involved in consulting on the MCI/WorldCom and Sprint deal. Now that went belly up.
Economides: The second one.
O'Connell: The second one, yeswith Sprint. How.who where is the roomwhat is it like in these rooms when the executives, who are used to being master of their own domain, suddenly realize they've lost it.
Economides: Well, I think the executives are not quite ready for having to answer to a judge, or to a European commissioner, or a European Competition Committee. They are not used to that, and the standards are different. They're not there to raise capital, they're not there to convince them to invest in the company, they're there to say they didn't break the rules. Executives are not used to doing that.
O'Connell: Yeah, they don't like it. Alright. We can't go on. But we can another time. For now, Nicholas Economides, thanks a lot.
Economides: Thank you.