General Electric and Honeywell Merger
Introduction
The merger case between General Electric Co. (GE) and Honeywell Inc. has sparked considerable debate between US antitrust agencies, economists and scholars since the announcement of its unsuccessful attempt by the European Commission (EC). GE is a corporation active in aircraft engines, financial services, and transportation systems while Honeywell is a manufacturing company producing aerospace products and is the leading supplier for engine starters. Both parties are from the US.
In Oct 2000, GE and Honeywell agreed to merge and Honeywell was to become a wholly owned subsidiary of GE. The US Department of Justice (DoJ) conducted thorough investigations and approved the merger with limited conditions (Platt Majoras, 2001, p. 3). However, the EC disagreed and decided to block the merger mainly because of vertical issues. The main concerns were (1) the strengthening of GE’s dominant position in the engine market through vertical integration of GE and Honeywell in relation to the supply of engine starters and (2) the vertical integration of aircraft purchasing, financing and leasing through GE Capital Aviation Services (GECAS) which can influence the markets in which Honeywell competes.
GE appealed the case to the EU Court of First Instance (CFI). The CFI decided to uphold the commission’s decision to block the merger not because of vertical issues but horizontal ones. However, it is interesting to know why the CFI disagreed with the main reasons that contributed to the EC’s decision to block the merger in the first place.
Vertical Merger; The theory. (Pro)
Vertical integration is a state where two firms are under a single ownership and productions are regulated at every stage. Backward vertical integration is where a firm regulates subsidiary inputs for its own production and forward vertical integration involves supervising retailers selling its products (Lipczynski et al., 2005, p. 546).
The most profound argument used to support
The merger case between General Electric Co. (GE) and Honeywell Inc. has sparked considerable debate between US antitrust agencies, economists and scholars since the announcement of its unsuccessful attempt by the European Commission (EC). GE is a corporation active in aircraft engines, financial services, and transportation systems while Honeywell is a manufacturing company producing aerospace products and is the leading supplier for engine starters. Both parties are from the US.
In Oct 2000, GE and Honeywell agreed to merge and Honeywell was to become a wholly owned subsidiary of GE. The US Department of Justice (DoJ) conducted thorough investigations and approved the merger with limited conditions (Platt Majoras, 2001, p. 3). However, the EC disagreed and decided to block the merger mainly because of vertical issues. The main concerns were (1) the strengthening of GE’s dominant position in the engine market through vertical integration of GE and Honeywell in relation to the supply of engine starters and (2) the vertical integration of aircraft purchasing, financing and leasing through GE Capital Aviation Services (GECAS) which can influence the markets in which Honeywell competes.
GE appealed the case to the EU Court of First Instance (CFI). The CFI decided to uphold the commission’s decision to block the merger not because of vertical issues but horizontal ones. However, it is interesting to know why the CFI disagreed with the main reasons that contributed to the EC’s decision to block the merger in the first place.
Vertical Merger; The theory. (Pro)
Vertical integration is a state where two firms are under a single ownership and productions are regulated at every stage. Backward vertical integration is where a firm regulates subsidiary inputs for its own production and forward vertical integration involves supervising retailers selling its products (Lipczynski et al., 2005, p. 546).
The most profound argument used to support