Strasbourg, 03/07/2001 (Agence Europe) - Following an in-depth investigation launched on March 1, the European Commission has, as expected, decided to prohibt the proposed acquistion of Honeywell by GE. In adopting the decision, which was idfficult given the size of the operation (the media had talked about the biggest acqusition in the hisotry of the industry), the Commission wanted to show that safeguaring consumer interests and ensuring an even playing field were its priorities. "The merger between GE and Honeywell, as it was notified, would have severly reduced competition in the aerospace industry and resulted ultimately in higher prices for customers, particularly airlines", Commissioner Mario Monti told journlaists.
The Commission's in-depth investigation had already highlighted the danger the acquisition would pose to competition since GE alone already had a dominant position in the markets for jet engines for large commercial and large regional aircraft. Honeywell is the leading supplier of avionics and non-avionics products, as well as of engines for corporate jets and of engine starters (a key input in the manufacturing of engines). The combination of the two companies' activities would have resulted in the creation of dominant positions in these markets, would have eliminated competition and ultimately adversely affected product quality, service and consumer prices. Anticipating the problems of obtaining the EU's approval (despite having won the agreement of the US anti-trust authorities), GE proposed a number of undertakings on June 14 2001 intended to address these concerns, which were considered insufficient (see EUROPE of 15 June, p.9, and 16 June, p.12). In a final bid, GE proposed a new set of remedies on June 28 (well after the deadline for the submission of undertakings), but to no avail. Commissioner Monti basically said that the Commission had had to make a prima facie assessment but this had been enough to note that the measures were not sufficient to solve the problems. Lacking time and certainty, he said, they had had to decide against the acquisition, although he did insist that "there were ways of eliminating these concerns and allowing the merger to proceed". "I regret that the companies were not able to agree on a solution that would have met the Commission's competition concerns". Asked about EU conditions concerning Gecas, GE's aircraft hire subsidiary (which had been the real stumbling block for the merger given the importance of Gecas in the new company), Commissioner Monti stressed that the Commission had never demanded that GE give up control of Gecas. He said that the Commission had requested a structural remedy within Gecas which could give serious guarantees that no discriminatory policy could be pursued in terms of purchasing. He stressed that this issue had been at the heart of the discussions between GE and Honeywell, but they did not actually propose this minimum acceptable remedy. The Commissioner also noted that the Commission and the US Justice Department had worked in close co-operation during the investigation. "It is unfortunate that, in the end, we reached different conclusions (…) the risk of dissenting views, although regrettable, can never to totally excluded. The GE/Honeywell is a rare case where the transatlantic competition authorities have disagreed. I am determined to strengthen our bilateral cooperation in the future to try and reduce this risk further". Mr Monti repeated his view that the Commission's refusal would not damage EU/US cooperation in future competition cases, quoting the example of the Air Liquide (France) merger with BOC (UK) which had been blocked by the US authorities without that giving rise to reprisals by the EU. He firmly laid to rest allegations of the GE/Honeywell case being, in reality, a test of strength between the EU and the US, insisting that the country of ownership of a company is irrelevant to competition laws, which are the basis of Commission decisions. He added that both companies had headquarters both in the US and in Europe in any case, namely United Technologies and Rolls Royce for engines and Rockwell and Thalès for avionics[United Technologies and Rockwell are US companies, Rolls Royce is British and Thalès is French.]. He stressed that this meant there was perfect symmetry on either side of the Atlantic. Commissioner Monti concluded by drawing the lessons of this failure by advising companies to come and speak to the Commission early in the day, to not delay in submitting their notifications and not to put the Commission in a position whereby it is unable to make a proper investigation.