No Deal
Caldwell, Christopher
No Deal In blocking the G.E.-Honeywell merger, Europe flexes its muscles. BY CHRISTOPHER CALDWELL THE 20 MEMBERS of the European Commission voted unanimously to block General Electric's $45...
...And in the long run, the failure of the G.E.Honeywell merger won't be such a big deal—provided we understand that the new balance of economic power that made it possible is a very big deal indeed...
...But because that goal has now been achieved, G.E.'s failure to acquire Honeywell is not likely to usher in an era of bad trade relations between Europe and the United States...
...Because it's also about new power relations at the highest levels...
...A big worry for Monti was General Electric's Capital Aviation Services (GECAS), an air-leasing company...
...General Electric, at one point, tried to fix the deal by promising to turn GECAS into a "ring-fenced entity," which would be under strict self-regulation in its dealings with Honeywell...
...companies...
...In the trade battles of the 1990s (particularly over African and Caribbean bananas), Europe learned enough about American willingness to retaliate that a renewal of cooperation will certainly be seen as both continents' best course...
...The assumption was that, since this remedy had worked like a charm in front of American antitrust judges, it would prove acceptable to the Europeans, too...
...But Europe's regulators rejected the remedy outright...
...For one thing, the biggest gap between front-page and business-page reporting in two decades...
...antitrust policy holds that antitrust laws protect competition, not competitors...
...Treasury secretary Paul O'Neill called this reasoning "off the wall...
...The economies of scale for transnational corporations are now such that no deal can be profitable if it's operative only in the United States...
...In a press release after the takeover was blocked, General Electric complained, "The commission took a fundamentally different approach to competitive issues from its counterparts in the United States, Canada, and nearly a dozen other jurisdictions...
...In May, it sailed through the Justice Department's antitrust division...
...The sticking point in the merger wasn't that General Electric was trying to buy off a piece of Europe's industrial heritage...
...The Washington Post decried Monti's role as a threat to "comity" between the two continents' antitrust regulators—as if that comity had been the result of anything other than the Europeans' lack of an antitrust policy, at least one they could enforce against the wishes of the United States...
...From now on, it will judge them by whether they serve the interests of competition— as Europe understands it...
...When G.E.'s chairman Jack Welch announced a year ago that he would delay his retirement in order to shepherd the deal through to completion, the thought of European involvement never occurred to him...
...By leasing all its jets from Honeywell, he figured, GECAS could secure an advantage over its European competitors...
...But all the American players behaved as if they didn't realize that Europe had decided to use the occasion to declare itself a second rulemaker in the global economy...
...And it wasn't strictly a question of American versus European interests...
...That's precisely what Europe was up to—establishing its own antitrust norms...
...One thing to be clear about is that both G.E...
...missed the point entirely...
...One of the most underreported aspects of the merger was the strenuous efforts made by American competitors— particularly Connecticut-based United Technologies and Wisconsin-based Rockwell International— to lobby EU regulators to stymie the deal...
...Like a nuclear test, its move was meant to send a message about one's seriousness—not to blow up the world...
...No longer will it judge such deals by whether an American court would see them as being in good faith...
...But that doesn't mean it's too boring to pay attention to...
...It didn't wash, either, with Charles James, just named head of the antitrust division in the Bush Justice Department, who attacked European obstructionism last week, saying, "Clear and longstanding U.S...
...He promised "the cleanest deal you've ever seen...
...American antitrust law became world antitrust law because no one in Europe could agree on any alternative to it...
...The European Union blocked this deal to establish its power—not its bloody-mindedness or stupidity...
...James thereby showed that he Christopher Caldwell is senior writer at THE WEEKLY STANDARD...
...In other words, more than the merits of the individual case were at stake in this merger...
...What changed was this...
...And then it went to Mario Monti, the chief antitrust regulator of the European Union...
...The blockage of the merger is evidence that Europeans now feel confident enough about their political union to speak with a united voice and lay down the law...
...This story is different—it's pure business-section...
...The 15 countries of the European Union have always constituted a larger economic bloc than the United States— but one so politically divided that it never had anything like America's political influence...
...Duh...
...BY CHRISTOPHER CALDWELL THE 20 MEMBERS of the European Commission voted unanimously to block General Electric's $45 billion takeover of Honeywell, and what's the result...
...and Honeywell are U.S...
...There was a message there, too...
...The financial boom of the 1990s always had a strong page-one, human-interest element...
Vol. 6 • July 2001 • No. 41
