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By Heather McLean, 4 September 2001 18:26

NEWS HP's takeover of Compaq will come under heavy scrutiny from the EU commission for antitrust investigation, according to two London law firms. Both Mike Pullen, EU specialist lawyer at Dibb Lupton Alsop, and Simon Stokes, head of competition law at Tarlo Lyons, said they expect the EU commission to take the merger investigation through to the second stage of enquiry because of market share and bundling issues. Pullen said a 1999 estimate showed the two companies jointly held 50 per cent of the PC and server market. Current estimates, said Stokes, are closer to 60 per cent in the light of market growth and additional bundling agreements. Stokes commented: "There is a market share threshold that the EU observe before they become involved in mergers (40 per cent). In this case, the EU has the power to intervene, even though both are US companies." "Overlapping markets of the two companies will be closely observed," said Stokes. If the merger goes through, the resulting company's potential conduct will be restricted in terms of contracts, price fixing and subtler issues. Carly Fiorina, CEO of the merged megalith, said: "There are anti-trust implications and we will be very co-operative with all the regulatory bodies and hope we can reach an agreement in the next six to nine months." Fiorina admitted HP had not yet spoken to any regulatory bodies. Stokes said the EU could call a halt to the deal, "If the merger means the creation of a dominant company, the commission may suggest those arrangements stop". However, Pullen stated that result will depend on the EU commission's initial market analysis. During the discussion period, Stokes said many competitors of the merged giant will also have the opportunity to raise their objections.