By Simon Zekaria - 25th May 2004
On the same day as Honeywell took the legal stand in Luxembourg, US merger partner and industrial giant General Electric says it has a “range of concerns” with the EU’s controversial veto decision in 2001.
European regulators, resisting calls of an impending crisis in transatlantic competition policy, blocked a deal in aviation hardware between the two companies three years ago worth approximately €40 billion.
And like Honeywell, GE is not short of criticism as it prepares legal arguments before a hearing on Thursday in front of the EU’s lower court, the Court of First Instance.
“General Electric disagrees with the European Commission’s findings, conclusions and theories in the Honeywell decision and is seeking guidance from the court on the correct approach for any future transactions,” said a spokesman.
“We have a range of concerns.”
The spokesman also confirmed a long-held position that the company has “no intention” of resurrecting the merger with Honeywell in aircraft parts.
GE/Honeywell
The rejection of the transaction by Brussels, was one of the most controversial decisions in the tenure of present EU competition commissioner Mario Monti – with the EU’s watchdog blocking the deal even though the US Department of Justice approved it.
The intention of the two companies resurrecting the deal is long gone, but what is at stake is no less significant for it.
The legal hearings for Honeywell on Tuesday and General Electric on Thursday are being argued on a point on legal principle that could drive the commission’s future capacity to rule on tie-ups of this ilk.
Questions of evidence and parameters of competence of the EU’s watchdog will be key questions asked in the EU’s Luxembourg-based court.
The week's developments are only part of a long-running process – an ‘Advocate General’ judge should deliver a non-binding opinion on the case appeal by the end of the year, with a conclusive verdict reached by the court in 2005 or possibly later.
Knock-on for Microsoft
The significance of the legal battle involving New Jersey-based Honeywell and Conneticut-based Genral Electric is not confined to the merger decision made three years ago.
The outcome could also point to a separate antitrust case, currently at issue, between Brussels and US computer giant Microsoft.
The EU fined the company a record €497.2 million at the end of March for leveraging software practices away from rival operators.
The charges involve excessive retention of markets and also garnering related products for the dominant company.
In Microsoft’s case, Brussels said the company was preventing competitor access to programming code and also unfairly ‘bundling’ audio-visual products with the Windows operating system.
In the GE/Honeywell case, the commission also alleged that the merger would tie up dominance in aircraft parts – such as engines and cockpit equipment – together with the complementary market position of GE’s financing arm, Gecas.
"This would have the effect of foreclosing competitors, thereby eliminating competition in these markets, ultimately affecting adversely product quality, service and consumers' prices," said the EU executive to support the decision.
In response, the companies said the charge of unfair ‘leveraging’ was not supported by sufficient evidence.
The question of ‘evidence’ proved the sticking point for the European Commission in the Tetra Laval-Sidel case – this week confirmed by a senior judge in the EU courts – and Brussels will be hoping the CFI will come to a different conclusion in the months ahead for GE/Honeywell.
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