By Anthony O. Miller
THE House of Representatives must act quickly – before a European Union deadline of May 31 – to pass crucial new legislation that both lets the government regulate mergers in Cyprus, and harmonises with EU law, Commerce Minister Nicos Rolandis said yesterday.
“Time is running out,” Rolandis said after meeting with the House. “I have the feeling they realise the importance of this legislation,” which has lain – EU-compliant – in limbo in the House for two years.
House Deputies think they have the whole year to pass the mergers law, when in reality they have only until May 31. “And if we want to harmonise on thousands of items, they have to take this into consideration” and act quickly, he said.
He said the bill’s passage has all the more urgency about it following several mergers – one in Cyprus, and two outside – that will have a great impact on the island’s economy.
The local one was Popular Bank’s recent £40-million purchase of a controlling stake in the PanEuropean Insurance Group, giving it minimally a 30 per cent market share.
Under the new law, a merger would be a “concentration of business activities by two or more entities,” each with a turnover of at least £2 million, whose combination “will control 15% or more of the market,” Rolandis said.
The new law would let an independent consumer protection committee in the Commerce Ministry – similar to Britain’s Monopolies Commission or the US Securities and Exchange Commission – review the proposed merger with an eye to whether it is against public interest or the consumer, he said.
But the law would not be retroactive, and would have no affect on the Popular Bank-PanEuropean deal.
One of the two outside mergers involved Rothmans, which has 67 per cent of the local cigarette market, and British-American Tobacco which has 20 per cent. Together this creates an 87 per cent Cyprus cigarette monopoly.
The other was the proposed merger of US oil giants Exxon and Mobil, which latter has a marketing deal with BP. As Exxon and Mobil control 60 per cent of Cyprus’ refined oil products market, and BP is in bed with Mobil, “the three of them… come under one (marketing) umbrella,” he said.
Rolandis said he cautioned the House that, even once it passes the new law, while it would let government regulate local mergers, “when two corporations merge outside Cyprus, in reality we cannot utilise this legislation” to regulate such mergers.
Rothmans and BAT could merge elsewhere, but be kept independent in Cyprus under the proposed law, he said. But “since they report to the same parent company elsewhere… in reality this is a monopoly here, even if they operate separately here.”
“In other words… there is nothing we can do,” even under the new law, to control such mergers. In fact, he said, the Republic already has its only two ‘remedies’ to outside mergers: “You can encourage imports… or have a fixed price.”
While lowering tariffs may encourage import competition to local monopolistic mergers, Cyprus will lose the tariff tool when, if not before, it gets an EU seat, Rolandis noted. (It has already lost some £300 million in annual public revenues as a result of the Cyprus-EU Customs Union agreement.)
As for fixing prices: “The free movement of goods from outside – which is Gospel with the EU – should not be interfered with,” he said. Otherwise, anybody with an interest, after Cyprus is an EU member, can claim “price- fixing in Cyprus interferes with the free movement of goods. And then the (European) Commission can stop the price-fixing.”
