The European Court of First Instance Upholds the European Commission’s GE/Honeywell Merger Prohibition

December 14, 2005

On 14 December 2005 the European Court of First Instance (the "CFI") delivered its long awaited judgments in the appeals against the GE/Honeywell decision (cases T-209/01 and T-210/01). The CFI upheld the GE/Honeywell merger prohibition decision of the European Commission (the "Commission"), concluding that the proposed merger would have created or strengthened dominant positions as a result of which effective competition would have been significantly impeded on three markets.

According to the CFI, the horizontal effects of the proposed merger were sufficient to establish that the Commission merger prohibition was well-founded. However, the CFI further stated that the Commission made manifest errors of assessment with regard to the effects of the merger on particular markets, especially in its analysis of conglomerate effects resulting from the concentration.


On 22 October 2000 General Electric and Honeywell announced their plans to merge. After the US DoJ informally indicated to the parties that it would allow the merger to proceed subject to remedies, the parties filed their merger notification with the Commission. Judging that the proposed commitments offered by the parties were insufficient, the Commission blocked the merger. As the parties were prohibited to put the merger into effect in the EU, GE and Honeywell had to abandon the deal. However, they appealed the prohibition decision of the Commission before the CFI.

The judgments

Findings of the Commission that were upheld by the CFI

  • The CFI upheld the Commission’s findings that the merger would have significantly impeded competition on three relevant markets: (i) the market for jet engines for large regional aircraft; (ii) the market for engines for corporate jet aircraft; and (iii) the market for small marine gas turbines. The CFI concluded that in the first market a monopoly with harmful effects on competition in the EU would have been created. In the second and third markets the parties would have become dominant.

  • With regard to other aspects of the case, the CFI held, first, that the Commission could conclude, without making a manifest error of assessment, that GE held a dominant position, prior to the merger, on the market for jet engines for large commercial aircraft. The CFI found, inter alia, that the Commission could legitimately consider GE to have used the commercial strength of subsidiaries within its group, in particular the aircraft leasing company GECAS, to win contracts which it might well not have won without their involvement.

Aspects of the Commission’s decision that were considered as constituting manifest errors of assessment

  • The part of the Commission’s decision relating to the vertical overlap between Honeywell’s engine starters and GE’s engines was considered to be unfounded. More specifically, the CFI held that the Commission failed to take into account the deterrent effect of Article 82 EC, despite its relevance, and that the Commission’s analysis was, as a result, vitiated by a manifest error of assessment.

  • The Commission did not establish to a sufficient degree of probability that the merged entity would have used GE‘s financial and commercial strength to extend to Honeywell’s markets (avionics and non-avionics products) thereby creating dominant positions on the various avionics and non-avionics markets concerned.

  • The Commission also failed to establish to a sufficient degree of probability that the merged entity would have bundled sales of GE’s engines with Honeywell’s avionics and non-avionics products thereby failing to demonstrate that dominant positions would have been created or strengthened for it on the different markets concerned.

Importance of the judgments

The Honeywell v Commission and GE v Commission judgments are important for the following reasons:

First, the case in question was the only merger between two US undertakings ever blocked by the Commission, while it was cleared by the US DoJ and other authorities worldwide. The EU and the US competition authorities have constantly claimed their relationship to be very cooperative and policies to be convergent, yet GE/Honeywell showed an obvious lack of efficient cooperation and rather diverging antitrust enforcement policies. The competition authorities have already learned the lesson and talks on a "second generation" agreement on closer cooperation between them have been re-launched.

Second, many commentators expected that the CFI would overturn the Commission decision and continue the practice established in the Airtours/First Choice, MCI WorldCom/Sprint, Schneider/Legrand and Tetra Laval/Sidel cases, where flaws in the Commission’s reasoning and serious procedural errors led to the annulment of the merger prohibition decisions. However, in GE/Honeywell the CFI did not concentrate on procedural errors, but rather analyzed the Commission’s substantive arguments.

Finally, in its judgments the CFI provided some very important insights on certain substantive issues, such as the economic theory of "conglomerate effects". This theory has already been used in the Tetra Laval/Sidel case, where the CFI overturned the Commission’s decision to prohibit the proposed merger on the basis that the Commission failed to prove that a merged entity would not only have the ability to harm competition, but that it would actually act anti-competitively. In GE/Honeywell once again the theory of "conglomerate effects" formed the basis of the Commission’s decision. However, in this case it was not necessary to prove the existence of conglomerate effects, sincethe merger’s horizontal effects were sufficient to establish that the concentration was incompatible with the common market.


Gibson, Dunn & Crutcher lawyers are available to assist clients in addressing any questions they may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or contact:

Peter Alexiadis – Brussels: +32 2 554 7210; [email protected]
David Wood – Brussels: +32 2 554 7210; [email protected]
James Ashe-Taylor – London: +44 20 7071 4221; [email protected]

© 2005 Gibson, Dunn & Crutcher LLP