The New Trustbusters: Brussels and Washington May Part Ways

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In July 2001, the European Commission acted on the recommendation of its antitrust arm to block a proposed merger between General Electric (GE) and Honeywell. The U.S. Department of Justice had already approved the fusion of these two American firms, which together boast annual sales of more than $150 billion. The opposition of the European Union (EU) therefore shocked the two companies and most business analysts, who had predicted that the move would make Honeywell a stronger, more efficient company. What made the rejection of the deal even more striking was that Europe and the United States had bragged about their close cooperation and convergent approaches to antitrust policy for several years. Instead, the Honeywell case underscored the profound transcontinental differences on this issue.

European antitrust regulation could become an unexpected stumbling block on the road toward a more integrated global economy. U.S. antitrust authorities presume that markets work; hence government intervenes only when there is clear evidence that business practices are harming consumers. In contrast, EU competition officials seem to seek the "right" market structure, sometimes placing the interests of competitors over those of consumers. In the GE-Honeywell case, both sides agreed the merger would result in lower prices for consumers. But whereas the Americans saw the price reduction as an unmitigated benefit, the Europeans viewed it as a detriment, because they speculated that it would make it harder for other firms to compete and perhaps allow GE and Honeywell to raise prices in the future. In the words of Charles James, antitrust chief at the U.S. Department of Justice, "What led the United States to clear the transaction -- the prospect that it would make the combined firm a more effective competitor -- was the very reason the EU opposed it."

The EU's opposition to the merger has highlighted the risks that multinational corporations face as antitrust laws proliferate around the globe. Some analysts have argued that the time has come to harmonize antitrust policy internationally to reduce potential conflicts. That goal is laudable -- but not if it means yielding on U.S. antitrust principles, which protect consumers and resist propping up inefficient businesses.

NEW RULES OF THE GAME