Case Study: the Eu Investigation of the Ge/Honeywell Merger

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I will assume the role of Marie Monti, the European Competition Commissioner, in analyzing this case. Role and Objectives:
The European Competition Commission (ECC), through its Merger Task Force (MTF), is charged to review the merger of companies whose combined worldwide and European revenues exceed the established threshold revenues. This threshold is $4.2 billion. The mandate for the commission is to protect free competition and to prevent massive concentration of market power on one company, which may in the long run affect consumer interest in the European Union. The MTF will assess the competitive effects of such mergers by: 1.Determining whether such combination will create a company that will be so powerful as to impede or stifle effective competition. 2.Determine the combined market share of the merging companies in relation to the immediate competitors (horizontal effect). 3.Evaluate the combined effects of the merging companies on the consumer, especially if they have the same consumer base (conglomerate effect). 4.Analyze the merging companies’ position as the supplier and/or customer of their immediate competitors (vertical effect). Why the deal was rejected by ECC:

General Electric (GE) held a dominant position (about 60%) in the manufacture of large jet aircraft engines. Meanwhile Honeywell held a leading position in the manufacture of avionics and non-avionics aerospace components. According to European Union Merger Regulation, mergers or acquisitions, that creates or strengthens a dominant position as a result of which effective competition will be impeded, will be prohibited. Based on this regulation, the merger as it is, unless some concessions are made, will be rejected as it impedes effective competition. These are the findings: 1.The combined position of the two companies will create exclusionary practices that will have the effect of shutting out single line competitors. Examples are Rolls Royce in aircraft engines and Rockwell...
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