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Van Miert leaves challenging competition legacy for Monti

The annual August shutdown is upon us. The European Union's institutions are on holiday and the decision-making vacuum is made worse this year by the absence of a functioning European Commission.

Commission president Romano Prodi's team does not take up the baton until September, provided the European Parliament agrees, and Jacques Santer's commission, which resigned ignominiously earlier this year, hung on into July in a caretaker role, but is now more or less moribund.

Yet the calm is deceptive. Outgoing competition commissioner Karel van Miert fired off such a barrage of investigations into abuses of dominant position, cross-border cartels, price fixing, illegal state aid and hidden subsidies that governments and business alike are reeling from the onslaught. His final act, and the one that grabbed the most headlines worldwide, was a dawn raid on Coca-Cola.

EU investigators arrived unannounced at the offices of the US drinks giant and associated bottlers in four European countries and confiscated documents. Their mission: to search out alleged abuses of the company's dominant position, offering incentives to retailers to stock only Coke's products.

It seemed particularly uncompromising, given the damaging health scare the previous month which had prompted several countries to ban sales of Coke products until recall measures had been carried out.

But it was a logical move just one month after the commission had fined British Airways almost GBP4.5 million (about HK$56.5 million) for similar offences - and quite in line with the tough van Miert image.

Mr van Miert had, after all, dared to move against Coke before, imposing fines for its failure to seek clearance from Brussels for its proposed acquisition of Cadbury Schweppes. And he had previously flexed his muscles against American corporations, winning concessions from Boeing over its handling of the merger with McDonnell-Douglas.

On top of that, he had fined Volkswagen for uncompetitive sales practices and generally ensured that the biggest companies and their political backers in European capitals took the EU seriously.

But the move against Coke was only part of Mr van Miert's activist agenda for his final weeks in office.

He opened an investigation into the commercial arrangements for Formula One racing, to the disgust of sponsors, racers and even governments. He launched an inquiry into the German post office and its alleged use of monopoly profits from Europe's most expensive letter-post service to make strategic acquisitions abroad ahead of next year's privatisation and to cross-subsidise its loss-making parcel service.

He also took on the German Government over hidden aid to Germany's public-sector banks. These institutions, which account for 50 per cent of the country's banking sector, usually have as their single shareholder either the Land - one of Germany's 16 states - or a regional or city administration.

When one of the largest state banks, Lower Saxony's West LB, required an increase in capital to comply with the Basle Convention's capital-adequacy rules, the state government tried a novel approach.

Instead of having the bank issue new shares and risk either a dilution of its shareholding or an injection of new taxpayer's cash, the state transferred the capital of its low-cost housing scheme into the bank's coffers.

That was in 1991. The move was copied by six other states.

But the commission cried foul and Mr van Miert finally decided the case last month, ruling the money was a state subsidy and demanding the bank repay 808 million euros (about HK$6.77 billion). The decision has implications for the public banking system across Germany and Austria, and the German Government is outraged.

Meanwhile, Bonn's state aids to industries in the former East Germany, long tolerated by Brussels as legitimate support for restructuring, have come under attack, as Mr van Miert imposed a repayment of aid on one steel firm, which may be forced to close as a result.

But, while the commission's previous tolerance of Germany has evaporated along with Germany's own acceptance of its decades-long role as EU paymaster, Mr van Miert has not been afraid to step on other nations' toes.

The competition directorate last month launched a formal investigation into the financing of public broadcasters in Italy and France, where cash injections, loans and subsidies are the order of the day, and private broadcasters regularly find themselves outspent and outbid by government money.

The move is only one step away from an investigation into the whole system of public funding for broadcasters, including licence fees - an area where Britain's BBC is particularly vulnerable.

But with Mr van Miert about to hand over the baton to his successor, Mario Monti, has he launched all his initiatives into a limbo where they will gradually fade away like so many restless but enfeebled ghosts? The answer is probably no. Mr Monti is one of the few commissioners to survive from the Santer team. Until now, in his role as commissioner for the internal market, he has taken on the EU's biggest governments over duty-free sales and won, beaten industrial leaders such as Glaxo Wellcome into submission over differential prices in member states and manoeuvring Britain into a corner on taxing savings.

Mr Monti is no punch puller. Provided he wins the support of other commissioners - and it's a big if - the present calm will be no more than a lull in the typhoon.

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