Making & Saving Deals 2005 GE/Honeywell Why the European Commission said “No” Andrea De Matteis 7 June 2005

Outline Introduction – Merger Control in the World – Merger Control in the EU GE/Honeywell – Background information on the deal – Relevant markets and position of parties – Commission’s concerns & legal issues – Differences between the EU and US approach

Growth in merger control first merger control law adopted by US Congress (Clayton Act) Today, more than 60 jurisdictions worldwide have merger control regimes Approx. 50 have compulsory filing requirements

Mandatory regime Voluntary regime No merger control 14 merger control regimes in the EU Member States’ control regimes

European Commission Merger Task Force (“MTF”) Part of DG Competition Commissioner Monti Full Commission Advisory Committee of Member States Reviews all concentrations with a “Community-wide dimension”

GE/Honeywell

Takeover involving two gigantic US companies: – The biggest ever industrial merger ($42 billion) – Combined worldwide turnover: $160 billion – in EU, GE $20 billion (and 85,000 employees) and Honeywell $5 billion Deal concluded in 3 days without consulting antitrust counsel The facts

The European Approach

Affected markets Avionics products (aircraft control, flying conditions, navigation, communication) Non avionics products (brakes, wheels, landing gear, aircraft lighting) Engine Starters Small marine gas turbines Engines for corporate aircraft Product Market Engines for large commercial aircraft Engines for large regional aircraft Leading position (40%-50%) Leading position (50%-60%) Leading position Honeywell 0 Substantial presence (30%-40%) Small share (10%-20%) Active GE Dominant position (60%-70%) Dominant position (52%-65%)

The challengers and their theories GE Capital will impose exclusivity for Honeywell avionics and non- avionics GECAS will only buy planes that have Honeywell avionics thereby foreclosing competitors Lower-priced bundles of GE engines and Honeywell avionics and non-avionics will foreclose competitors

Will there be more GE/Honeywell cases in the future? There will be more attention paid to EC merger control by non-EU merging companies GE/Honeywell is a rare exception to the rule of systematic convergent outcomes Merger control necessarily involves a prospective analysis of inherently uncertain future effects “Reasonable minds may reach different conclusions on the application of the same law to the same body of evidence." (Tim Muris, FTC Chairman) Conclusions