The French government is once again in trouble with the European Commission. Charlie McCreevy, the EC internal market chief, said he will block the French state’s attempts to prevent foreign companies from taking over its “national champions.”
The trouble has stemmed from the fact that France has actively worked to prevent foreign entities from acquiring French companies. For example, at the same time that France Telecom was purchasing Spain’s third-largest mobile operator, Amena Movil, for E10.6 billion ($12.9 billion), French government ministers were publicly saying it would not permit any French national champion to be purchased by foreign companies. This was in response to moves by US-based PepsiCo Inc to purchase the French food company Groupe Danone SA.
The European Union is looking to prevent the French government from implementing its planned ban on foreign takeovers in some industries, saying the proposal would stifle competition and economic growth. This will not be allowed, because it would spell the end of the free market as we know it, Mr McCreevy, the EU’s top regulator for the internal market, said in Rome last week.
French President Jacques Chirac and Prime Minister Dominique de Villepin had proposed to protect companies in 10 strategic industries. The priority for France is to protect France’s industrial competitiveness and the strength of its companies, Mr Chirac said in July.
Other recent examples of French protectionism include the French government persuading Siemens not to bid for troubled French engineering group Alstom, which under investigation over a questionable state-aid package from the French government. Last year, France urged Switzerland’s Novartis not to bid for drugmaker Aventis, pushing instead for its $63 billion acquisition by Paris-based Sanofi-Synthelabo.
Also, a French judge in August ordered Swiss food giant Nestle to re-open a loss-making factory in France. Nestle was ordered to relaunch production at the chocolate and Nescafe plant outside Marseilles. The factory had closed in June after nine years of mounting problems. The judge said Nestle had breached France’s strict code on plant closures and questioned whether the move was justified on commercial grounds. This plant has no chance of ever making money in the long-term, said Francois-Xavier Pellourd, the company spokesperson at the time. Despite this, the company was forced to re-open the plant.
EU law currently only permits takeover defenses for military and security, but France is looking to add to these categories to include biotechnology firms and casinos. The French Finance ministry has said it will publish a list of industries for protection, which also includes surveillance, computer security, and interception and monitoring technologies.
We made it quite clear to the French authorities that it can only be in very specific, limited circumstances, Mr McCreevy said, adding that France has kept the commission informed of its plans over the past year.