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Is the EU friend or foe to industry?

For an institution that sees itself as the business executive’s friend, the European Commission has taken a beating lately.

The main telecommunications lobby in Europe has compared it with Stalin; a German energy executive has called it a greater threat to energy security than Gazprom; and a top Austrian telecommunications boss has said, it is easier to do business in Belarus, than in Brussels. Why the sudden outcry against an organization that prides itself on removing barriers to cross-border business, reining in state meddling in the economy and promoting free trade?

Critics say it is because the commission, the European Union’s executive arm, is trying to make itself more popular, with crowd-pleasing initiatives that bash business. Supporters of the commission say it is because Brussels is tackling cozy business interests that obstruct competition and exploit dominant market positions for their own profit. There are grains of truth in both explanations. The president of the European Commission, José Manuel Barroso, has made no secret of pursuing an agenda of delivering lower prices and greater rights to consumers, aiming to demonstrate the benefits of the EU after voters rejected a proposed constitution in 2005.

Brussels has used opinion polling to identify its targets for action, like cross-border fees for mobile phone calls and text messages, credit card charges, obstacles to changing bank accounts, and windfall earnings of giant energy companies. Neelie Kroes, the EU competition commissioner, has assessed record fines against companies she accused of fixing prices and rigging markets in everything from elevators to beer. Kroes, a former business executive, often accompanies hefty fines with stinging comments accusing companies involved in cartels of “outrageous” behavior and “ripping off” consumers. Fresh from her antitrust victory over Microsoft, she is now turning to the field of energy, trying to break up European giants to promote greater competition. Kroes argues that separating power suppliers from the ownership of natural gas pipelines and electricity grids will spur investment and force prices down. That argument prompted Wulf Bernotat, chief executive of E.ON, the German utility, to brand the commission a greater threat to energy security than Gazprom, the Russian natural gas monopoly, before he backed down and agreed to sell E.ON’s power grid to end an EU antitrust investigation.

The European telecommunications commissioner, Viviane Reding, became the bête noire of European phone companies when she used regulation, in alliance with the European Parliament, to force them to reduce sharply the cost of international mobile phone calls. She argued that vacationers and business travelers were being overcharged for dialing home and receiving calls while abroad. Less-expensive mobile roaming tariffs sliced hundreds of millions of euros from phone companies’ annual earnings. Reding is now threatening to use the same tactic unless phone companies also cut the costs of cross-border text messages and Internet access within the 27 nations of the EU by July 1. Telecommunications companies say Brussels should leave it to market forces to drive prices down rather than bullying them to lower charges that could be used to invest in modernizing networks.

And yet Ernest-Antoine Seillière, the official voice of 20 million European companies, does not see Brussels as a bureaucratic enemy of business. “From where I sit, we consider the European Commission to be as business friendly as it can be,” Seillière, president of BusinessEurope, the European employers’ group, said in an interview. “Especially under the leadership of Barroso, it has a very strong conviction that what Europe wants to achieve is linked to the success of business.” But he added, “There is tendency to consider its own popularity is linked to the environment and protection of consumers in a way that could be dangerous for business.”

Recent EU proposals to fight climate change by auctioning emissions permits could “pose a very heavy threat” to industries like steel, cement and aluminum without a global agreement on common environmental standards, he said. Seillière also worried that EU competition policy sometimes thwarted efforts to create “European champions” - companies with the scale to compete globally against US or Asian companies. Part of the commission’s job is to uphold the freedom of movement of capital, goods, services and workers, which often means beating back efforts by governments to bend the rules to protect “national champions” or shut out foreign competitors.

Alexander Schaub, a former head of the EU’s competition and internal market divisions, who is now a lawyer with Freshfields, argued that if Brussels were cowed, protectionists would have a field day. “Business has an interest not to intimidate the commission into becoming silent,” he said. (IHT, Reuters)