The European Commission's recent unanimous rejection of a proposed merger between two American companies threatens to widen the rift between Europe and the United States. On July 3, the 20-member Commission, which is the executive body of the 15-nation European Union, voted to prohibit a proposed $45 billion merger between General Electric and Honeywell, International, both headquartered in the United States. It was the first time in the Commission's history that it had killed a business merger (already approved by the U.S. Department of Justice) involving two U.S. companies.
The fact that a European regulatory body could prohibit a merger of two U.S. companies came as a surprise to many Americans. The news of the deal being killed, reported ironically on July 4, American Independence Day, makes U.S. sovereignty seem somehow less absolute than before.
"Welcome to globalization," explained Time magazine (July 8). "Multinational companies are required to follow the laws of all the countries in which they operate. Because global companies affect markets far beyond their headquarters, both EU and U.S. antitrust authorities review the mergers of foreign companies with substantial activities within their jurisdiction." The European Commission has exercised jurisdiction since 1990 over all mergers between firms with combined annual revenues of $4.2 billion, of which $212 million must be within Europe. The proposed merger of GE and Honeywell far exceeded those thresholds. GE alone had $25 billion in European revenue last year, and employs 85,000 people in Europe.
The Bush administration and some members of Congress reacted angrily to the decision. Treasury Secretary Paul O'Neill described the Commission's decision as "off the wall." He criticized the process and results of the EU intervention. "The European process is in my judgment flawed in the sense that the people who are making the judgments are not elected by anyone and their judgments are not subject to a judicial review or any kind of relief."
"And it seems to me that there is a need to make some correction," he said, "especially in those cases where they are making judgments about business combinations of companies that are completely located outside their jurisdiction… What the EU's commission is doing is a far reach from looking at questions that are directly of interest to the European Union and reaching into the affairs of other countries."
Mario Monti, the European competition commissioner, had suggested killing the deal out of concern that it would hurt competition, chiefly European companies, in the aircraft engine industry. The U.S. Justice Department had approved the proposed merger because of the benefits to customers in the global aerospace market. This highlights a fundamental difference between European regulators' apparent primary concern of protecting European competitors, and U.S. regulators' emphasis on providing benefits to customers.
England's Telegraph notes that "the dispute risks setting off a further downward spiral in relations [between the U.S. and EU] coming so soon after clashes over the U.S. withdrawal from the Kyoto climate agreement, the death penalty in America and EU attempts to upstage U.S. foreign policy in North Korea and the Middle East" (July 5). Other prominent differences that have emerged in recent times involve corporate taxes and missile defense. The Chicago Tribune observes that "the last thing this marriage needs is more hot rhetoric or threats" (July 10).
Bible prophecy indicates an end-time struggle between an economic superpower in Europe and the United States, part of the modern-day descendants of Israel. The differences between these two economic powers will lead to an appalling clash that will only be healed by the return of Jesus Christ as King of kings, to usher in the Kingdom of God (Revelation 17; Jeremiah 30).
Sources: Time, The Telegraph, The Chicago Tribune, The Washington Post, The Washington Times.