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Europe’s top antitrust official, European Commissioner for Competition Mario Monti, confirmed Tuesday that regulators plan to subject General Electric Co.’s $40.5 billion purchase of Honeywell International Inc. to a detailed competition review. An in-depth probe extends European Union regulatory procedures by four months. GE chairman Jack Welsh had met with Monti in Brussels, Belgium on Monday to officially offer a package of concessions to allay regulators’ worries about the deal’s impact on competition and avoid an extension of the investigation. While it is uncertain what the companies were prepared to offer, it is clear that they fell short of addressing all of the Commission’s concerns. “I informed yesterday Mr. Welch of my intention to open the second stage,” Monti said. “This means at this stage we have some concerns about the proposed merger.” Monti said a formal decision regarding the second stage will be adopted before the end of this week. The Commission, the EU’s executive body and competition watchdog, is looking closely at the deal because of GE’s activities as a conglomerate. While there are very few competitive overlaps — Morristown, N.J.-based Honeywell is primarily an avionics products manufacturer and GE’s activities focus on making jet engines — the Commission is concerned that GE’s other businesses may allow it to further leverage its market power. Fairfield, Conn.-based GE, for example, has a leasing unit, GE Capital Aviation Services, which is itself a major buyer of aircraft. EU regulators were studying this unit to see whether GE’s leasing activities would have any influence on buying patterns, and in turn create higher prices that could be passed on to the average passenger. The sheer size and complexity of the deal may be another factor in the Commission’s decision to launch a detailed probe. A source familiar with the EU’s review suggested last week that the Commission would be inclined to open a detailed investigation if there were any doubt that the concessions the companies were offering fell short. A full inquiry would allow the Commission to further investigate the deal before taking a final decision. The source said the Commission was inclined to expect “structural divestments” rather than “behavioral divestments” in exchange for early antitrust approval. Structural divestments include clear-cut asset sell-offs and are generally the preferred concession in Commission reviews because they do not need to be monitored. A behavioral commitment in this case could include a pledge by the companies not to bundle their products together in sales contracts or to create a firewall of sorts between them. Copyright (c)2001 TDD, LLC. All rights reserved.

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