By Anthony O. Miller
COMMERCE Minister Nicos Rolandis yesterday called on Parliament to pass a bill his ministry introduced two years ago to grant him the power to regulate corporate mergers, in the wake of two recent huge mergers in major Cyprus commercial sectors.
Until the House acts, the government can do nothing to protect consumers from predatory corporate mergers, Rolandis, who also holds the Industry and Tourism briefs, told the Cyprus Mail.
With mergers the wave of globalised competition’s future, and Cyprus, itself, ironically encouraging them locally, House passage of such controls is all the more crucial, he said.
“Internationally, 1998 was a record year for mergers. We’ve seen the Daimler-Chrysler merger, the Traveller’s-Citicorp merger, and many others,” Rolandis said. “So the trend at the moment internationally, is for corporations to merge in order to create more strength.”
But without the requisite regulatory powers, Cyprus remains on the sidelines: “We cannot touch mergers. Companies are free to merge at the moment” as they wish, he said.
Rolandis cited “two cases which may be taken up in the future under this proposed legislation”: the recent mergers of BAT (British-American Tobacco) and Rothmans; and the proposed mergers or combinations of the three main players in the island’s petroleum production – Exxon, Mobil and BP.
He also cited the Popular Bank Group’s recent £40-million purchase of a controlling stake in the PanEuropean Insurance Group, giving Popular local insurance sector dominance.
The Rothmans-BAT merger gives “these two companies… a monopoly of (cigarette) production in Cyprus,” Rolandis said. Rothmans has 67 per cent of the local market, and BAT has 20 per cent,” for a total of 87 per cent, he said.
“Case number two is the proposed merger between (US oil giants) Exxon and Mobil. This has not yet been approved by the Securities and Exchange Commission in the US. It is pending, but it appears that it will happen,” he said.
“Now Exxon and Mobil in Cyprus have approximately 60 per cent of the (refined oil products) market. And then you have BP, which has a marketing arrangement with Mobil. So the three of them, as far as marketing is concerned, come under one umbrella. And both cases may be considered under this new legislation,” he said.
His ministry’s regulatory bill languishing in the House of Representatives is already “harmonised with the (EU) aquis communitaire” and merely awaits House enactment, Rolandis said.
In light of the BAT-Rothmans, Popular-PanEuropean mergers, and the looming Exxon-Mobile-BP combination, Rolandis hopes “it will be taken up soon (by the House)… because without this legislation, we cannot handle any one of the cases which has, or may arise.”
He said the thrust of both EU law and the pending Cyprus bill is to allow review any potentially anti-competitive, anti-consumer aspects of “a merger of two corporations, which, by merging, control more then 15 per cent of the market.”
The main criterion, he said, is “whether… either the rights of the consumer may be damaged or jeopardised, or public interest affected,” by a proposed merger. “If none of the two happen, then they can proceed,” he said. “If we feel there is a risk, then we would be entitled to stop (the merger) as far as Cyprus is concerned.”
As things stand, Cyprus’ ability to protect consumers and competition consists mainly of the authority to prevent price-fixing within a particular industry or economic sector.
Meanwhile, Rolandis said, his ministry is working to encourage local mergers “wherever this is appropriate” as there are many small companies, all churning out the same goods or services.
“We are going to encourage mergers for economies of scale. Then you reach a point where you have to draw a line between the economy of scale and the risk to the consumer,” he added.
What is important now, Rolandis said, is to avoid laying blame for the two years his bill has hung-fire in the House. “What is important now is to have this legislation considered by the House and finish with it. It’s not a question of asking why they did not do it for two years.”
