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GE Planning to Appeal EU Decision

August 1, 2001

BRUSSELS, Belgium (AP) _ General Electric Co. plans to appeal the European Union’s decision to block its $41 billion merger with Honeywell International Inc., a source familiar with the matter said Wednesday.

An appeal would not be aimed at reversing the European Commission’s rejection of the merger. Instead, GE wants to refute the Commission’s finding that GE has a dominant position in the jet engine market, the source said on condition of anonymity.

That ruling, if allowed to stand, could make it difficult for GE to make future acquisitions.

The New York Times carried a similar report, citing unidentified executives close to the company, in its Wednesday editions.

GE spokesman Gary Sheffer said ``we are still considering our options″ regarding the appeal.

The EU announced July 3 it was blocking the GE-Honeywell merger, the first time it ever bore sole responsibility for stopping an all-American deal.

GE has until the end of September to file an appeal at the Court of First Instance in Luxembourg, court spokeswoman Fionnuala Connolly said, adding that none had been received yet.

If GE loses there, it can then go to the European Court of Justice, also in Luxembourg.

The court has never annulled a merger prohibition since the EU began reviewing them under its current laws a decade ago.

Of six merger prohibitions appealed, three have been upheld and the others are pending, including last year’s WorldCom-Sprint deal, which was blocked on both sides of the Atlantic.

Antitrust lawyers complain that the European courts act too slowly to save deals, but say appeals can still be valuable in clarifying legal issues.

Top on the list in the GE-Honeywell case is the EU’s reasoning that GE might have been able to drive competitors out of the aerospace market by offering customers a complete package of GE engines, Honeywell avionics and financing from GE Capital Aviation Services.

That so-called ``bundling theory″ was sharply criticized in the United States, where regulators are more inclined to allow businesses to pursue such synergies in part because they have more power to break up any monopolies that might result.

``I think the Commission’s decision will set a bad precedent for conglomerates like GE″ if allowed to stand, said Fiona Carlin, an antitrust lawyer at Baker & McKenzie’s European Law Center in Brussels.

An appeal is important ``so we get some clarity,″ she said.

When WorldCom announced its appeal last year, it said it did not want the EU’s decision to ``become the basis for future Commission actions or initiatives.″

That case, filed Sept. 27, is ``still in early stages″ because not all the written submissions have been received, Connolly said. No date for a hearing has been set.

GE shares were down 37 cents to $43.13 in trading Wednesday morning on the New York Stock Exchange.

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