GE, Honeywell Criticize EU Rejection

BRUSSELS, Belgium AP reported that appeals filed by General Electric Co. and Honeywell International Inc. against the European Union's rejection of their planned merger argue that the decision was based on factual errors, faulty reasoning and shaky economic analysis.

The appeals filed Sept. 12 ask the Court of First Instance to annul the July 3 decision and order the European Commission, the EU's executive branch, to pay court costs.

The legal documents are not yet public record, but summaries were published in the EU's Official Journal on Saturday.

The EU had never before blocked a deal between two U.S. companies that had already been cleared by regulators in Washington, and its action provoked sharp criticism from U.S. lawmakers and Bush administration officials.

In rejecting the deal, the EU said it was concerned that bundling GE's strength in jet engines and aircraft financing with Honeywell's in aviation technology might enable the combined company eventually to drive competitors out of business.

The appeals argue that the decision did not provide sufficient evidence to support that conclusion.

``There is no factual basis for the assertions ... that bundling is a common practice in the aerospace industry, that Honeywell has engaged in extensive bundling in the past or that the proposed merger with GE would have enabled the merged entity to foreclose or marginalize rivals by engaging in bundling,'' Honeywell's appeal argued.

The companies also charged the EU's conclusions about the alleged negative effects of bundling were not supported by economic models.

GE claimed its proposals to meet the EU's antitrust concerns were rejected ``without proper analysis.''

And both noted that the Commission approved a previous deal in the same industry involving one of the same players: AlliedSignal Corp.'s 1999 acquisition of Honeywell.

Amelia Torres, a spokeswoman for EU competition commissioner Mario Monti, said the Commission was ``confident its decision is solid and will withstand the legal challenge.''

The GE-Honeywell case is one of four appeals of an EU merger rejection pending before the Luxembourg-based court.

Although rulings, which can take years, come too late to revive a deal, antitrust lawyers in Brussels say they could have a big impact on future merger cases.

Many lawyers and economists have criticized the EU's application of ``untested'' economic theories such as ``collective dominance'' and ``portfolio effects'' in deciding merger cases, and are hoping for guidance from the court.

``Frankly speaking, we're finding it difficult to advise our merger clients,'' Olivier d'Ormesson, a lawyer at Linklaters & Alliance, said last month.