Concern grows over French anti-takeover decree

French plans to vet foreign takeovers in newly defined "strategic" sectors are coming under fire from a growing number of critics _ including companies the government had vowed to protect.

A soon-to-be-published decree, touted by ministers after rumors of a PepsiCo Inc. bid for French food company Danone SA provoked a political outcry in July, would give the government a veto over takeovers in 10 industries deemed sensitive to national security.

Sectors on the list, already confirmed by the Finance Ministry, include several over which most states retain tight control, such as arms manufacturing and encryption.

But the decree also covers companies with activities in biotechnology, data security, casinos and antidote production _ fueling concern that it could lead to a broader kind of protectionism.

Prime Minister Dominique de Villepin, who vowed publicly to defend Danone from U.S.-based PepsiCo in July, unveiled the new measures just days later in a speech in which he also called for greater "economic patriotism."

EU Internal Market Commissioner Charlie McCreevy fired a shot across France's bows earlier this month, telling an economic forum in Italy he would "vigorously pursue" breaches of EU law resulting from attempts to thwart foreign takeovers.

Neelie Kroes, the EU's competition chief, reinforced the warning in a speech to the same gathering.

"Member states are sometimes tempted to seek to protect their industrial or financial crown jewels from takeovers by companies from other countries," Kroes said. "We have seen such signals from France just recently."

Such measures would lead to a "1930s-style downward spiral" of protectionism, the Dutch commissioner added, "be they 'economic patriotism,' illegal state subsidies to keep companies artificially afloat or placing companies off-limits to foreign takeovers."

For France's conservative government, however, it is the criticism at home that has carried the most sting, AP reported.

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