The attempted merger between General Electric and Honeywell - A case study of transatlantic conflict

The thwarted merger of General Electric and Honeywell stands out as, so far, the only merger between US companies to be derailed solely by the European anti-trust authorities, while being cleared by the US Department of Justice (DoJ) and 11 other jurisdictions. In this paper, the authors examine the European Commission’s decision, and the theories underlying it and compare the Commission’s approach with that followed by the DoJ. They observe that the Commission and the DoJ had a different assessment of broadly similar facts, and attempt to understand the source of the divergence. The authors find that (i) the horizontal effects identified by the European Commission rely on a particular perspective of market definition which is debatable (and leaves some questions unanswered). (ii) The anti-competitive effects in the bundling and Archimedean leveraging theories are not sufficiently robust so that they could be resumed. Accordingly, their likelihood should be supported by strong evidence but the evidence presented by the Commission was far from compelling. (iii) The deal may have involved significant efficiencies that were overlooked. These observations raise the suspicion that the Commission’s decision may have been affected by bureaucratic capture, such that civil servants did not follow the mandate that had been assigned to them. We find that the procedure enforced at the time was vulnerable to capture and that the Commission had an incorrect perception of the standard of review that the Court would apply to its decision in the context of an appeal. The accountability to which the Commission felt subject to was thus biased downwards and enlarged the scope for capture. In addition some (admittedly casual) evidence regarding the actual unfolding of the procedure, as well as subsequent reforms of process and procedure undertaken by the Commission, would support the view that significant problems arose in this area.