The EU’s Flawed Assessment of Horizontal Aspects in GE/Honeywell: Re-Visiting the Last Pillar of the European Prohibition Decision
Technische Universität Berlin (TU Berlin)
August 31, 2009
This paper argues that - in contrast to the decision of the European Commission in 2001 and the ruling of the Court of First Instance in 2005 - the merger between General Electric and Honeywell International would not have led to anti-competitive horizontal effects. Applying the European Commission Merger Regulation valid in 2001 and on the basis of empirical evidence available in that year, the relevant markets are defined taking into account demand-side and supply-side substitutability. The worldwide bidding markets for large regional jet aircraft engines, corporate jet aircraft engines and small marine gas turbines are characterised by potentially volatile market shares, high importance of after-sales revenue and profitable outside options. According to the two-level approach of the European Commission, firstly the competitive situation of the engine manufacturer in relation to its direct customer, the aircraft or marine vessel manufacturer, and secondly the competitive effects in the respective market of end-use applications are analysed. The paper shows that GE was not in the position to exert market power prior to the merger and would not have been ex post.
Keywords: merger control, GE/Honeywell, horizontal effects, aerospace markets
JEL Classification: L12, L41
Date posted: September 11, 2009
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