The Court of First Instance ("CFI") has issued its judgment regarding the European Commission's decision to block the acquisition of Honeywell International by General Electric Company. The CFI has ruled that the European Commission's decision was justified on this basis that a dominant position would have been created or strengthened in certain product markets.

In July 2001, following notification of a merger between Honeywell International and General Electric Company earlier in the year, the European Commission issued a decision declaring the merger incompatible with the common market. The parties were therefore prohibited from merging.

The European Commission found that if the merger was permitted it would create a position of dominance in the markets for supply of avionics, non-avionics and corporate jet engines and that it would strengthen General Electric's dominant position in the market for engines for large commercial and regional jets.

General Electric and Honeywell brought actions (Cases T-209/01 and T-210/01) before the CFI seeking annulment of the European Commission's decision to block the merger.

The CFI has now issued its judgment. It has held that the merger would create or strengthen dominant positions on the market for engines for large regional jets, on the market for corporate jet aircraft and on the market for small marine gas turbines. The CFI ruled that that this was enough to uphold the European Commission's decision.

The CFI did, however, reject the European Commission's findings into the conglomerate effects and the potential strengthening of General Electric's dominant position on the engine market by virtue of it acquiring Honeywell's engine starter product business.

In relation to conglomerate effects, it held that there was insufficient proof that a dominant position for avionics and non-avionics product lines would be created.

With regard to the potential strengthening of General Electric's position on the market for engines, the CFI rejected The European Commission's findings on the basis that it had failed to take into account the deterrent effect of Article 82 EC.

In summary, although the European Commission had made errors in reaching its decision to prohibit the merger between General Electric and Honeywell, the CFI held that the decision was justified on the basis that dominant positions would be created or strengthened by the merger.

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