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The European Union on Sept. 14 stood by its controversial decision in July to block General Electric Co.’s proposed $41 billion takeover of Honeywell International Inc., following a court challenge by the companies. Amelia Torres, the European Commission spokeswoman for Competition, said: “As far as the Commission is concerned, we believe the decision is legally sound and we are confident that it will withstand a legal challenge.” General Electric and Honeywell filed separate appeals Wednesday at the Luxembourg-based European Court of First Instance against the Commission’s decision to block the merger. The companies filed separate appeals, but each seeks to annul the Commission’s decision, a court official confirmed Thursday. Law firm Clifford Chance P�nder, which handled GE’s regulatory notification to the Commission for the merger, will also represent the company. Skadden, Arps Slate, Meagher & Flom of New York filed Honeywell’s merger notification to the EU, and has also been retained to handle the appeal. Clifford Chance recently represented Pfizer Inc., which purchased Warner Lambert Co. last year, in the EU’s antitrust review of that deal. The British law firm also advised Franco-Belgian financial services group Dexia SA in its acquisition of Artesia group. The firm’s European competition practice includes 85 lawyers across Europe, and was previously headed by Chris Bright, who took the lead in GE’s merger notification, along with Simon Baxter. In April, during the Commission’s review of GE-Honeywell, Bright announced his departure to law firm Shearman & Sterling, and Baxter replaced him. Skadden Arps’ Brussels office has three partners: Barry Hawk, Henry Huser and James Venit. The office has played a role in several big European antitrust deals, including representing Salomon Smith Barney Inc. as financial adviser to America Online Inc. in its acquisition of Time Warner Inc.; Germany’s Mannesmann AG in its merger with Britain’s Vodafone AirTouch plc; and Pfizer in its acquisition of Warner-Lambert. The firm is also involved in the EU’s current review of Cendant Corp.’s acquisition of Galileo International Inc. and will represent Compaq Computer Corp., which Hewlett-Packard Co. is acquiring. News of the appeal comes as no surprise, as the clock for the companies to file their challenge was running out. Companies seeking to overturn a decision by the Commission, the EU’s executive agency and its competition watchdog, must lodge any appeal within two months of receipt of the Commission’s ruling. Although the EU blocked Fairfield, Conn.-based GE’s acquisition of Honeywell on July 3, the companies had until the end of September to appeal. Honeywell, of Morristown, N.J., would not comment on the substance of its appeal, but GE spokeswoman Louise Binns said that it was being lodged on both substantive and procedural grounds. Honeywell press officer Tom Crane said that the two companies had filed separate appeals because “We’re basically appealing on separate grounds.” Binns, however, said, “There is no reason why the appeals were lodged separately, as clearly we are working on this together.” One of the companies’ arguments is expected to target the Commission’s theory of bundling, which formed the crux of Brussels’ decision to block the deal. During its investigation, the Commission concluded that the might of the combined company would have been too strong, ultimately pushing out the competition. This dominance would have resulted from some of the horizontal overlaps of the two companies, as well as the vertical integration of GE’s engine-making abilities and Honeywell avionics and non-avionics products. But in addition, GE’s financial activities, in particular its leasing unit, GE Capital Aviation Services, would have had too great an influence on customers so that bundling the merged company’s products and services would have been inevitable. Lawyers are at odds over whether such a theory tests the limits of established European competition law. There is some doubt over whether the Commission went out on a limb on this case, said one EU competition lawyer, who spoke on condition of anonymity. The bundling concept applied in GE-Honeywell is arguably different from that applied in the Commission’s antitrust investigation against Microsoft Corp. The theory of bundling in the Microsoft case is “more or less an accepted theory insofar as it is a case in which there are elements of contractual tying,” he said. While it is unlikely that either company is interested in reviving any sort of deal, it has been widely expected that they would appeal to challenge the Commission’s legal precedent, should either company wish to do further deals in the sector. For most appeals, it would be a matter of principle, and flexibility for deals down the road, said Brussels-based competition lawyer Thomas Vinje of San Francisco-based Morrison & Foerster. Since the Commission assumed merger-vetting powers in 1990, the agency has reviewed about 1,800 cases; GE’s acquisition was only the 15th merger blocked. Seven of the Commission’s vetoes have been challenged in court, and the three court proceedings have upheld the Commission. The most recent of the four still in progress include the proposed merger of WorldCom Inc. and Sprint Corp. and U.K. tour operator Airtours’ proposed buyout of rival First Choice. While it is difficult to gauge GE’s and Honeywell’s chances in their appeal, proceedings will probably take years. Airtours-First Choice, for example, was blocked in early fall of 1999 and the appeal proceedings are far from over. “It’s a long battle,” Vinje said. “We’re looking at a couple of years.” Copyright (c)2001 TDD, LLC. All rights reserved.

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