BRUSSELS — Through their different political, economic and legal lenses, U.S. and European antitrust regulators occasionally see the risks and rewards of mergers very differently.
Nowhere is that difference more visible than in the proposed linking of General Electric Co. and Honeywell Inc. The Justice Department has given its blessing while European Commission authorities are poised to block the move, providing an example of how even well-meaning judges of fairness and competition are influenced by the constituencies they serve.
Charged with evaluating any major corporate fusion for its potential to "create or strengthen a dominant market position," the commission's Merger Task Force has spotted possible disadvantages for European makers of jet engines and avionics.
But because U.S. regulators with the Justice Department and the Federal Trade Commission must ensure fairness only on their side of the Atlantic, the potential downside for European companies might not have caught the U.S. eye.
"There's no institution that judges the global benefits and costs [of mergers], although these markets are now global," said Ulrich Kamecke, a professor of competition policy at Berlin's Humboldt University. "The Americans and the Europeans both take the natural perspective of what is good for their part of the world. It's not really protectionism, but a natural inclination to ask, 'Who is my guy in this case?' "
Governments of the 15 European Union states appoint the 20 commissioners who make up the executive body, and the positions usually are doled out to political backers. That makes them keenly aware of the potential electoral fallout if a corporate merger threatens businesses in the commissioners' own backyards. That's one reason why the full commission is expected to veto the GE-Honeywell deal when it meets for a final ruling here July 3.
It won't be the first time the commission has quashed an alliance outside its borders, nor is it unprecedented for U.S. regulators to block an all-European takeover. Just last year, the planned merger of France's Air Liquide and Britain's BOC Group collapsed because of U.S. objections after it had won EU approval.
Still, the two teams of antitrust arbiters tend to agree more often than not and sometimes collaborate to spare firms the disruption of separate investigations.
The European Commission reviews far fewer proposals than its U.S. counterparts, said spokeswoman Amelia Torres, because the threshold for EU jurisdiction covers only mergers involving at least 5 billion euros, or $4.32 billion, in global turnover, of which at least $215.9 million is in EU states.
U.S. authorities can weigh in on any fusion involving at least $50 million and even smaller companies when niche areas of competition are involved, said Caldwell Harrop, an attorney for the foreign concerns sector of the Justice Department in Washington.
Of the 1,700-plus cases reviewed by the Merger Task Force in the 10 years it has existed, only 14 have been rejected and only one involved U.S. companies, Torres said. That sole spurning, the MCI Worldcom/Sprint deal rejected a year ago, now is making its way through an appeals process with the European Court.
Tuesday's final vote on GE-Honeywell is expected to wield a deathblow to the merger. Competition Commissioner Mario Monti already informed the U.S. companies earlier this year of his concerns that the merger would allow them to "bundle" products and services into packages so attractive for aircraft manufacturers that competitors would be driven out of business.
GE's main competitors in jet-engine production as well as Honeywell's in avionics are mostly European companies, as is the only serious competitor to GECAS, GE's aircraft leasing and financing subsidiary.
Despite the pull of political geography, analysts say the GE-Honeywell deal didn't have to end up this way if GE had been willing to treat the Europeans with the same kind of deference it showered on Washington regulators.
The Americans got off on the wrong foot with Monti by ignoring the deadline for informing the commission of intent to merge. With GE having $130 billion in global turnover last year and 85,000 employees in Europe, it clearly exceeded the thresholds for commission review. The intended linkup was announced in October, but the commission was not informed until February, Torres said.
Informing the commission sets in motion Phase 1 of the review, limited to 30 days and an additional two weeks under extraordinary circumstances. Investigators request extensive financial information to evaluate the companies' current market positions and also can inspect their premises.
At the end of the first phase, Monti can approve the deal, push it into the deeper scrutiny of a four-month Phase 2 investigation or recommend "undertakings" by the companies to address concerns about infringements on competition.
