New EU treaty raises fears

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BRUSSELS -- Leaders at the European Union summit in Brussels agreed at the weekend to scrap a 50-year commitment to "free and undistorted competition" in a new EU treaty, raising fears that media antitrust regulation will be undermined.

The clause, part of the 1957 Treaty of Rome that set up the European Union, was removed from the new text after pressure from France. Instead, the new text talks of a "social market economy aiming at full employment".

The revision to the treaty could undermine efforts by the European Commission - the EU's antitrust watchdog - to bust cartels and monopolies, to vet mergers, and to control state subsidies.

Competition oversight is arguably the Commission's single most powerful competence, and a symbol of how much the EU's members are ready to commit to a truly internal market. But removing the reference from the treaty could threaten the Commission's authority.

After protests by British Prime Minister Tony Blair, a legally binding protocol was added that aims to protect existing competition law. At the same time, officials tried to assuage concerns by pointing out that there are 13 references to free market competition in existing EU treaties, so the EU's powers over competition would not be changed.

EU Competition Commissioner Neelie Kroes said that an EU internal market without competition rules "would be an empty shell - nice words, but no concrete results." However, she accepted that the protocol "clearly repeats that competition policy is fundamental to the internal market."

But Kroes' predecessor as Competition Commissioner, Mario Monti, said the change would still make it more difficult for Brussels to crack down on protectionism and antitrust abuses. "The European Court of Justice will not be able to assert the principles of competition in judging on individual cases and that will be a gift to all resurgent forms of economic nationalism and protectionism," he said.

The European business lobby, Business Europe, warned that the move would create legal uncertainty, as no-one could be sure how the European Court of Justice might interpret EU law in future competition disputes. "You can say it is symbolic but it may have an impact that we should not underestimate," said Jerome Chauvin, the group's director for legal affairs.

It was French President, Nicolas Sarkozy, who insisted on the change. It comes two years after EU plans for a constitution were rejected by French voters, amid fears that it was too geared towards unrestrained, free markets. "I had to take account of the 55 per cent of the French people who voted No," he said. "The EU must protect its citizens and not act as a Trojan Horse for globalization."

The Commission has become one of the most respected competition authorities in the world, unafraid to block huge mergers, including the proposed link-up between GE - owner of NBC - and industrial giant Honeywell. Its work on cartel-busting has also led to price dropping in real terms for consumers. Its ongoing media investigations include probes into the CISAC online licensing system, and a new inquiry into Sony Music Entertainment's 2004 merger with BMG.
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