France Faces EU Criticism

by Ulrika Lomas, for LawAndTax-News.com, Brussels

06 September 2005

Speaking at the weekend, the EU's Competition Commissioner, Neelie Kroes condemned the French government for its attempt to protect certain industry sectors from foreign takeovers.

In an interview with French newspaper, Les Echos late last month, French Industry Minister, Francois Loos revealed that the authorities are planning to restrict foreign takeovers in selected industry sectors.

Speaking with regard to the rumoured takeovers by overseas companies of food group Danone and nickel firm, Eramet, Mr Loos stated that the cabinet is likely to press for the implementation of new rules allowing French firms to employ the same anti-takeover measures in foreign bids that they are permitted to use domestically.

He additionally revealed that the French authorities are planning to publish a list of industry sectors considered strategically important, which will therefore be protected to a large extent from foreign buyouts.

Although the full list of industry sectors to be protected has not yet been published, the Wall Street Journal revealed last week that they are likely to include antidote production, biotechnology, casinos, cryptology and dual technologies which can be used for both civil and military activities. The WSJ went on to report that according to unnamed French Industry Ministry sources, the oil and food industries have not been included on the list.

According to European media sources, speaking at an economic forum held in Italy at the weekend, Mrs Kroes observed that:

"When sheltered from competition you may gain the illusion that you are in a more comfortable position, in particular if you can pass on the 'bill' to consumers. It is also nice to receive public subsidies to cushion the consequences of lacking competitive edge."

"Moreover, member states are sometimes tempted to seek to protect their industrial or financial crown jewels from takeovers by companies from other countries. We have seen such signals from France just recently."

She concluded by suggesting that:

"All such measures, be they 'economic patriotism', illegal state subsidies to keep companies artificially afloat or placing companies off-limits to foreign takeovers risk taking Europe into a 1930s-style downward spiral of tit-for-tat protectionism."

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