Luxembourg, 02/06/2004 (Agence Europe) - The decision by the European Commission of 3 July 2001 to cancel the merger of the two American groups General Electric and Honeywell International has no doubt been the decision by the Commission that has attracted the most comment and polemic, due to the fact that these are two non-European outfits, and not small players. On 12 September the same year, in the two months following the Commission's decision (the time-delay prescribed in the rule books), both companies called upon the Court of First Instance to cancel the ban on General Electric's purchase of Honeywell.
The arguments of Honeywell international, which were developed during the hearing of the parties, were as follows: the Commission's decision was based on factual errors and manifest errors of understanding; it was not sufficiently reasoned; it was based on no economic analysis; it violates defence rights as it was based on new theories; lastly, twenty months earlier, the Commission had approved the merger between Honeywell and AlliedSignal as being compatible with the common market and the functioning of the EEA agreement, a merger which raised identical problems in the same branches.
General Electric said that the Commission was wrongly applying criteria established in the 1989 regulation. It felt that the decision did not go far enough to prove illegal practices, and was not backed up by an economic model which demonstrated the negative effects of this practice on competition. The group criticised the Commission for rejecting the commitments it had proposed to undertake, without having them analysed sufficiently. It reproached it for painting an entirely different picture of the market to that in its Engine Alliance decision taken eighteen months earlier on the same marketplace. General Electric lastly talked of violation of defence rights, the Commission having failed to supply access to all relevant documents, or having granted access to other documents without giving sufficient time to study them.
Both hearings took place with considerable pomp and circumstance. Among General Electric's lawyers was Cherie Booth, wife of the British Prime Minister Tony Blair, accompanied by her bodyguards. The Commission had a high-ranking official from its legal services, Richard Lyal and Lars-Hendrick Röller, the economist in chief recruited in September by the Commission, as part of its reorganisation in order to support it, with his team of specialist economists, in complex competition cases. Also present were lawyers from Rolls Royce and Rockwell Collins, who had called upon the Court of First Instance to intervene alongside the Commission.
The Commission criticised GE for occupying the dominant position on the market for reactors for large-capacity commercial aircraft and for regional aircraft. It felt that the solidity of its position on the market, its financial muscle and the vertical integration into aircraft leasing allowed the existence of a dominant position on the markets to be concluded. It also felt that the regrouping of both American companies would have created a dominant position on the markets for the supply of aircraft products, non-aviation products and aircraft reactors and the reinforcement of the existing dominant position of GE in the large aircraft market.