THE ATTEMPTED MERGER BETWEEN GENERAL ELECTRIC AND HONEYWELL: A CASE STUDY OF TRANSATLANTIC CONFLICT

The thwarted merger of General Electric and Honeywell standsout, so far, as the only merger between US companies to be derailedsolely by the European anti-trust authorities, while being clearedby the US Department of Justice (DoJ) and 11 other jurisdictions.In this paper, the authors examine the European Commission'sdecision, and the theories underlying it and compare the Commission'sapproach with that followed by the DoJ. They observe that theCommission and the DoJ had a different assessment of broadlysimilar facts, and attempt to understand the source of the divergence.The authors find that (1) the horizontal effects identifiedby the European Commission rely on a particular perspectiveof market definition, which is debatable (and leaves some questionsunanswered); (2) the anticompetitive effects in the bundlingand Archimedean leveraging theories are not sufficiently robustthat they could be presumed (Accordingly, their likelihood shouldbe supported by strong evidence, but the evidence presentedby the Commission was far from compelling); (3) the deal mayhave involved significant efficiencies that were overlooked.These observations raise the suspicion that the Commission'sdecision may have been affected by bureaucratic capture, suchthat civil servants did not follow the mandate that had beenassigned to them. We find that the procedure enforced at thetime was vulnerable to capture and that the Commission had anincorrect perception of the standard of review that the Courtwould apply to its decision in the context of an appeal. Theaccountability to which the Commission felt subject was thusbiased downwards and enlarged the scope for capture. In addition,some (admittedly casual) evidence regarding the actual unfoldingof the procedure, as well as subsequent reforms of process andprocedure undertaken by the Commission, would support the viewthat significant problems arose in this area.