Transatlantic Antitrust?

It would have been the biggest industrial merger ever. But the EU Commission vetoed the General Electric-Honeywell get-together. Tempers have flared up across the Atlantic in a manner seldom heard before. As a result, antitrust policy — until recently considered an arcane matter — has made the front pages of newspapers. Reason enough for us to explore who did what to whom and when in this new Globalist Factsheet. Why is it, for example, that the EU can veto a merger of two U.S. companies?

Why were Americans so nervous about this case?

With a stock market capitalization of $485 billion, General Electric is the most highly valued public corporation in the United States — and the world. That makes GE more than 30% larger than Microsoft, the second most highly valued U.S. company, at $371 billion.

(TheGlobalist.com)

Is that why the Europeans are so nervous?

To put GE’s market cap in perspective, the entire German stock market is only about $1.1 trillion in May 2001 — a little more than twice as much as General Electric.

(TheGlobalist.com)

And just how big would the merged company have been?

After completion of its merger with Honeywell International Inc., General Electric Co. would have employed 465,000 people.

(Wall Street Journal)

But why did the EU get involved? After all, this was supposed to be a deal between two U.S. companies?

By law, the EU’s executive arm — the European Commission — has to review all mergers and acquisitions will combined worldwide sales in excess of five billion euros and with European sales of at least 250 million euros, regardless of where the company itself is based.

(Wall Street Journal)

What was the historic significance of the EU actions?

When the EU rejected GE’s $45 billion acquisition of Honeywell in July 2001, it blocked what would have been the biggest industrial merger ever.

(Washington Post)

Has it happened before?

Not quite, but in 2000, the European Commission revealed its plans to prevent the $115 billion Sprint-WorldCom merger just one day before the U.S. Justice Department filed suit to block the deal.

(Wall Street Journal)

How often does the EU Commission reject mergers?

Of all of the mergers and business partnership agreements reported to the EU’s Competition Office, only about 0.5% have been rejected by the Commission. All in all, 13 mergers were vetoed by the EU Commission since 1990.

(Financial Times)

How had U.S. companies faired in Brussels prior to the failed GE-Honeywell merger?

Between 1990 and 2000, the EU’s antitrust authorities reviewed 1,392 proposed mergers — 348 of which involved at least one U.S. company. 13 cases were prohibited, 61 cases were aborted or withdrawn. Only one of the prohibited cases involved a U.S. company.

(Financial Times)

Have U.S. authorities ever returned the favor — by blocking a merger of European companies?

In 2000, a proposed intra-European merger between Air Liqide, a French industrial gases company, and a British rival was cleared by the EU — but dropped because of regulatory opposition in the United States.

(Wall Street Journal)

Are U.S. antitrust authorities in the business of blocking domestic deals?

In the same week that the EU moved to block the GE-Honeywell merger, the U.S. Federal Trade Commission indicated opposition to the Pepsico-Quaker and United-U.S. Airways mergers in the United States.

(Washington Post)