The risk to see Europeans and
American to diverge in their appreciation comes from the fact that they don’t
give the same value to the objectives assigned with the policy of control of
the concentration. However, the Commission shows itself more and more in favour
of a structuralist design of control.
The commission, you know, is
qualified to authorize and validate fusions beyond a certain amount.
In the exercise of this competence,
the decision of the European Commission of
These criticisms primarily related
to the appreciation made by the Commission of the potential risks which such a
fusion represented, and particularly, the risk to see GE/Honeywell practising
twinned offers of products, in order to eliminate its competitors from the
markets concerned.
The Commission, first of all, noted
that GE had a dominant position already on the markets of the engines for large
commercial transport aircrafts and large regional transport aircrafts.
Concerning the structure of the
markets, the Commission noted that GE or Honeywell held very significant shares
of market on three of the relevant markets retained by the Commission, i.e. the
market of the engines for large commercial transport aircrafts, it market of
the engines for small regional carriers, the market of the engines of large
regional transport aircrafts, finally, the market of the engines for jets of
company.
- At the level of the engines for
large commercial transport aircrafts: GE holds a share of market higher than
50% with regard to the engines already installed and, the share of GE market is
even more important with regard to the engines ordered but not yet installed.
- At the level of engines for big regional
bearers: GE and Honeywell is divided the market, GE having a market share
raised(brought up) as regards already installed(settled) engines and superior
to 90 % as for the commanded but not yet installed(ordered but not yet installed,commanded but not yet settled) engines.
- At the level of engines for jets of company:
Honeywell holds(detains) a market share about 40-50 %,
GE playing a less important role and the rest of the market being distributed
between two other competitors.
The Committee(Commission)
then considered that the operation GE-Honeywell would strengthen the already
dominant position of GE on the market of the big commercial and regional
bearers:
- For the Committee(Commission),
the existence of a dominant position of GE on these markets notably deducts of
the financial power which he(it) exercises (by his(its) subsidiary Major GE),
his(its) presence on the markets of the financing and the credit lease in
aeronautical material(subject) (or it seems that GE is the most important buyer
of planes and one of the world leaders in lease of planes). Furthermore, the Committee(Commission) raises(finds) that GE is already the
most important actor from the point of view of the already installed(settled)
engines and that airline companies generally prefer to buy the same engines as
those already installed(settled) even when both competitors of GE are not
capable of reproducing the same advantages and the financial power of GE.
Finally, the customers are widely dependent on GE for the delivery of the
engines of planes.
- The Committee(Commission)
then noticed that the fusion with Honeywell would confer to the new set(group)
a real monopoly on the market of engines for big regional bearers, Honeywell
being the only competitor of GE on this market.
- Furthermore, although Honeywell does not
market engines for big commercial bearers, the Committee(Commission)
considered that the fusion would give to GE the possibility of operating sales
coupled by several types of products, so strengthening its already dominant
position on the market.
Finally, as regards the jets of company, the Committee(Commission) considered that the envisaged
operation would have the effect of creating a dominant position.
GE / Honeywell would have then on one hand market
of 50-60 %, with much weaker competitors and would benefit from the financial
power of GE as well as from its vertical integration in the financial services
and from the lease. The new entity would have then the capacity to practise
coupled sales and so to exclude his(her) competitors
of the market.
The Committee(Commission)
also considered that the fusion of GE and Honeywell would end in the creation
of a dominant position on the markets of products avioniques
and not - avioniques
In its decision, the Committee(Commission)
explains first of all that it considers that Honeywell already holds(detains)
leader's position on these markets, in particular in reason its very important
market share (from 30 % to 70 %, according to products) of the unequalled
dimension of its range of products, its capacity to make systems integrated
into a global system and especially, its capacity to practise sales coupled by
different products.
The Committee(Commission)
then attempted to demonstrate that the envisaged operation would have the
effect of creating a dominant position on these markets: the vertical
integration of the new entity ( Honeywell being present at the level of the manufacture
/ marketing GE being present at the level of the financing / lease) the
capacity of so increased by GE / Honeywell to practise coupled sales would join
to exclude his(her) competitors of the market.
The question of the coupled sales
In spite of the criticisms formulated across
the
The Committee(Commission)
describes in its decision three types of coupled offers susceptible to be
practised: the marketing of a set of different products at a reduced price
(discount(delivery) of coupling), the marketing of products exclusively in a
coupled way ( bound(connected) sales), and the technical integration of
products. The Committee(Commission) considered that
such practices would allow GE / Honeywell to exclude - in the long run -
his(her) competitors of the market and to eliminate so any constraint on its
commercial policy.
From a theoretical point of view, a politics(policy) of the competition aiming at
spreading(pushing aside) the risks of emergence (or of abuse) from a dominant
position thus leads(drives) to a generally more narrow definition of the market
"antitrust". Furthermore, he could be supported that the ban on an
operation of concentration should be based only on solid proofs as for the risk
of creation of a dominant position from the point of view of the structure of
the market, and not on hypotheses as for the future behavior
of the merged entity (such as the risk of practices of coupled sales).
B. The argument of " efficiency defence "
Besides, for certain authors, the European
point of view indeed ignores rather widely the earnings of efficiency which
accompany certain concentrations, and transform even the argument of "
efficiency defence " advanced by companies engaging parties in the fusion
in argument of " efficiency offence ": the decision of the committee(commission) denies here the existence of an
appropriate(clean) demand for the global products proposed by the merged
entity. These global offers, which are in the conglomérales
fusions one of the main subjects of anxiety on behalf of the authorities,
indeed allow the buyers to save costs of deal (once by negotiating there where
they had several interlocutors, by saving costs bound(connected) to the variety
of the systems and the products, etc.).
We are thus here in a case where the fusion can
contain earnings of efficiency, which benefit at the same moment the companies
which merge and to the buyers. A criterion taking into account the only
dominant position of the merged entity is thus incapable to take into account
it. We thus see illustrated through this example the way the application of the
politics(policy) of the competition, through the pursued objectives and the
used criteria, can establish(constitute) a brake in the growth: here,
insufficient taken into account of the argument of efficiency defence
led(drove) the European buyers to go without a global offer including different
products of equipments of planes (engines, equipments of avionique
and of not avionique) and forbade the companies to
benefit from synergies which these claimed to obtain because of their fusion.
Finally, certain commentators contented with
criticizing the incoherence between the solutions held(retained)
in the United States and in Europe as regards the effect of range and the
practices of coupled sales - without explaining however for which motives the
right of the competition (which rests(bases) nevertheless on certain
"political" choices) should the same both be quoted(esteemed) by the
Atlantic Ocean
The partisan economists of "
For the main part, the decision of the Committee(Commission) seems to rest(base) on a detailed
inquiry of market (in particular, the decision contains passages pulled(fired)
by internal and confidential documents of the parts(parties), what is rather
rare). She(it) also rests(bases) on coherent legal and
economic principles of analysis with her(its) constant practice (for example as
regards the power of market which results from the vertical integration of GE
and from its capacity to offer a complete range of products, even if it is true
that this type of reasoning had had never again such an impact on the
definitive decision of the Committee(Commission)). Finally, the corrective
measures proposed by the parts(parties) did not
eliminate the difficulties so clearly (" clear-cut " in the European
jargon) as the Committee(Commission) usually requires him(it). In particular,
the Committee(Commission) was always very suspicious
towards commitments of behavioral type.
It is about an austere decision, not only
because she(it) ends in the ban on an operation of
concentration (what remains very rare), but also because it denounces(cancels)
clearly certain current practices of GE on certain markets of the engines of
planes - such as the coupled sales and the use of its power of market in
financing and in lease to obtain commands(orders) of engines.