19 - 25 July 2001
Issue No.543
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Al-Ahram Weekly Online 19 - 25 July 2001 Issue No.543 |
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In the absence of rules
The rejection by the European Union's competition commission of the merger of General Electric and Honeywell International -- had it gone ahead it would have created the world's largest corporation --underscores the importance of regulatory bodies in ensuring fair play within the market economy.
The EU's competition commissioner, Mario Monti, against massive political odds, blocked the merger, already been approved by the US authorities, between the two American giants, and by which GE would have made a $42 billion acquisition of the industrial conglomerate Honeywell.
Approval of GE's $42 billion acquisition of Honeywell would, the EU commissioner made clear, require major concessions. GE's commitment to divest $2.2 billion worth of annual sales from Honeywell's aviation was too little to persuade Monti: the merger was rejected.
What is remarkable in the GE-Honeywell case is that it indicates that, in the context of globalisation, it is not enough that mergers be approved by national antitrust agencies. Their impact on the international economy must be taken into account.
The message sent by the Monti's decision was that regulators must uphold the principle of equal opportunity regardless of the political clout wielded by investors. Nor should this appear strange in the advanced economies of the West. As early as the late 19th century American regulators were busy framing competition laws to prevent the creation of entities that might engage in non- competitive practices. Likewise, the EU created its own antitrust body.
Monti's refusal was premised on the ability of GE, one of the world's biggest companies, to offer a vast array of services, ranging from medicine to aviation to electronics and, in all of these domains, direct businesses to itself.
Complaints against the merger were raised by other multinationals, including United Technologies, Rockwell International and Rolls Royce.
In Egypt the antitrust and regulation of competition law, drafted for the first time in 1995, has yet to be presented to parliament. Nor, according to the minister of the economy, Youssef Boutros Ghali, is it included in the legislative programme of the current People's Assembly session.
Why the seven-year delay?
That major Egyptian businesses are against the law is no secret. That it has been beset by political problems, too, is well-known.
The law has undergone endless modifications and is now in its 11th draft. It remains to be seen how effective it will eventually be in preventing the drift from a state to a private monopoly.
Meanwhile, there is no regulatory agency to which those who wish to complain of unfair practices can resort. The result is all too evident in several sectors. Take, for example, Ezz Steel Rebars. While it controls 70 per cent of the domestic market, the company's chairman also owns shares in the another major steel producer, El-Dekheila. Over the past weeks complaints have been voiced by smaller steel producers over this deepening monopoly. What applies to steel applies too to the cement, fertiliser, retail and wholesale markets, and to the mobile phone sector and soft drinks producers, according to a study issued by the National Council for Production and Economic Affairs.
The failure to finalise the long-awaited law has begun to lower Egypt's standing among investors, both local and international. Comments about the delays, both on and off the record, have become increasingly pointed from officials of the International Finance Corporation, the World Bank's private sector funding arm, as well as from the European Commission.
Antitrust laws are desperately needed, and needed now. Further delays will only wreak additional damage to Egypt's reputation among investors, and hardly promote confidence in the Egypt market operating fairly, and without discrimination. Laws and regulations tailored to suit the vested interests of the privileged few are no way of serving the people of Egypt.
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