GE-Honeywell—economic ‘bundling’ still off limits
Brussels, Belgium —On July 3, 2001, the economic theory of bundling moved dramatically from the academic arena to that of public policy, when the European Commission blocked the $42 billion megamerger between General Electric Co. (GE) and Honeywell International Inc. Key to the objection to this amalgamation was a concern over economic bundling. The decision came after U.S. regulatory authorities had approved the transaction.
On December 14, the Court of First Instance, the EU's second-highest court, backed the Commission's original view that the deal would have given the combined company, including GE's finance affiliate, too much power in the jet-powered-aviation and small-marine-gas-turbine markets. However the Court also indicated that the Commission "made manifest errors of assessment" in leaning on a theory of effects of a conglomerate, such as economic coercion of customers and suppliers alike.
Nevertheless, GE's counsel Hendrik Bourgeois was quoted by the Associated Press in saying, "It seems that the court agrees with our positions… that the Commission was wrong to predict that the transaction would have had a conglomerate effect based on the financial strength of GE, the vertical integration that the transaction would have caused and from bundling."
The decision is moot for the companies, as neither firm has plans to restart the merger process.
— Richard Phelps , senior editor, Control Engineering