European Unions: Labor's Quest for a Transnational Democracy

8. The European Regulation of Transnational Company Mergers

c h a p t e r e i g h t  The European Regulation of Transnational Company Mergers G iven the institutional framework of EU competition policy, it is reasonable to think that organized labor cannot influence the regulation of cross-border mergers. Yet unions have increasingly been trying to influence EU competition policy. Their activities , however, have differed considerably. Whereas organized labor politicized the ABB Alstom merger case, labor adopted a strategy in the Alcan-Pechiney-Algroup (APA) merger case that did not challenge the technocratic merger control policy of the European Commission. The adoption of these conflicting strategies is surprising because the same German and French unions played a decisive role in both merger cases. The following chapters analyze the contradictory strategies adopted by labor in these two parallel cases in order to identify the mechanisms that explain the divergent strategies. First, however, it is necessary to determine the wider context of EU merger control policy. What are the implications of mergers for corporate governance and labor relations? How does the Commission regulate company mergers, and what are the roles played by other social, economic, and political actors in its competition policy? The (Strong) EU Politics of Merger Control Transnational Mergers: Implications for Management and Labor Mergers and acquisitions usually reflect the following motivations. First and foremost, corporations merge to increase their efficiency by taking [119] advantage of economies of scale and by realizing synergy effects. This frequently implies a reduction of the combined workforce. Second, companies may merge to secure their position in a market. Third, companies may merge to seek to acquire a dominant position in the market.1 Finally, the executives of multinational corporations often have a personal interest in company mergers because their personal income, prestige, and power usually depend on the size of their corporation (Möschel 2000; Chaterlety 2002). The new merger wave has also been a product of some specific developments of the 1990s, such as the geographic expansion of the capital and product markets as a result of the establishment of the European single market and EMU.2 Mergers were also facilitated by low interest rates, booming stock markets, and the deregulation of the telecommunications, media, energy, transport, and finance sectors. The merger wave also re- flects a change in management philosophy. Up to the 1980s, many companies tried to diversify their activities and, thus, also their risks. Today’s management philosophy favors instead a concentration on core activities. Consequently, companies sell their secondary sectors and try to become the best in class in their core businesses. Until recently, multinational firms reproduced ethnocentric homecountry -centered or polycentric host-country-centered governance structures , but almost no firm created genuine global or geocentric structures (Perlmutter 1965). Correspondingly, labor relations in multinationals re- flected either the system in the corporation’s country of origin or the system in its host country (Ferner and Quintanilla 1998; Geary and Roche 2001). Therefore, many scholars described the whole concept of the global corporation as a myth (Ruigrok and Van Tulder 1995; Hirst and Thompson 1996).3 Recent cross-border mergers, however, have departed from these underlying national legacies. The takeover of Mannesmann by Vodafone, for instance, blurred the boundaries between continental and Anglo-Saxon corporate governance (Höpner and Jackson 2003). Likewise , the EU recently adopted a new EU takeover directive to create a truly integrated EU capital market.4 Transnational mergers typically entail three consequences for labor (Edwards 1999): (1) collective dismissals, (2) a divide-and-rule policy on the part of central management with regard to workers’ representatives from different countries, and (3) enduring divergences between national management -labor relations systems. However, cross-border mergers also create new transnational dimensions in both labor-labor and management-labor relations, challenging the privileged relations between management and unions from the company’s country of origin. 120 European Unions Competition Policy: A Paradigm Case of Regulatory Policy Making Since the Treaty of Rome in 1957, competition policy has been one of the core EU policies considered necessary for the creation of the common market (Majone 1994a, 1994b). EU competition policy differs from other policy fields in that it developed almost in tandem with national antitrust policies (McGowan 2000). European and national antitrust authorities reinforced one another and finally prevailed over the Schumpeterian traditions that remained dominant in many European states until the late 1980s.5 The sovereignty of...