If two American companies decide to merge, and US antitrust
regulators approve the deal, they go ahead and merge, right? Wrong.
In today's globalized world, European and other foreign
regulators can block an American deal if the parties do much
business abroad. And the European Union appears ready to kill
General Electric's planned $42 billion takeover of Honeywell
International, heralded as the biggest industrial merger in
If GE continues to reject European demands that the deal be
changed, and the European Commission does not back down in the next
three weeks, it will be the first time Brussels has scuppered a
merger between US companies that Washington has approved.
That prospect has some US politicians worried.
"I think this is something that's troubling, something we need to
look at," Sen. Phil Gramm told CNBC, the business news TV channel.
"It's a very real question - what power the EU should have in
dealing with two companies that are fundamentally American
European officials say it is perfectly normal. "What matters is
where the companies do business, not where they are located," says
Amelia Torres, spokeswoman for the EU competition commissioner,
Mario Monti. "If they do business in Europe, they have to abide by
Those rules sometimes reflect a transatlantic difference of
approach. European investigators, for example, pay more heed than
their American counterpoints to arguments by rival companies that
they would suffer from their competitors' mergers.
Last year, GE generated about $25 billion of its $130 billion
worldwide revenues in Europe, where it employs 85,000 people,
according to Jeffrey Immelt, GE president.
Mr. Monti, a Yale educated Italian economics professor, has the
final say over any deal if the merging parties have a combined
global turnover of more than $4.25 billion and European sales of
$225 million each.
That gives Monti and his 100- strong team of investigators
considerable power over US firms - and that power is set to grow,
says Bert Foer, president of the American Antitrust Institute, a
Washington-based think tank.
"Companies have to conform their behavior to the strongest boss,"
he says. With the new US administration expected to take a less
interventionist antitrust line, "if the US backs away and the
European Commission steps forward, what it says will increasingly
American and European regulators generally agree about proposed
mergers that come up for their review. European authorities almost
always approve deals involving US firms, and some analysts say the
GE-Honeywell affair is a one-off.
But the case has revealed disparate styles that some antitrust
lawyers say could cause friction in the future.
The European Competition Task Force tends to give greater weight
than US regulators to the opinion of third parties who would be
hurt by a merger, antitrust experts say. Two of GE's competitors,
Rockwell International and United Technologies, played a leading
role in lobbying EU officials against the Honeywell takeover,
according to people close to the negotiations.
"Because the timing is so tight, there is a limit to what
investigation the commission can do on its own," says Nils von
Hinten-Reed, an antitrust expert with London Economics, a
consultancy firm. By law, the commission must rule on any merger
application within five months. "Inevitably they put what one party
says against what the other party says."
The EC's Ms. Torres defends the hearing that the commission gives
to merging companies' rivals. "We are not working in a vacuum," she