GE Plans to Offer EC Facts in Merger

General Electric Co., arguing it has facts and theory on its side, will offer no concessions to the European Commission at a closed hearing today over its purchase of Honeywell International Inc., legal sources close to the case said Monday.

The commission is holding a two-day hearing on competitive issues rising out of the proposed combination of GE’s manufacture of large commercial jet engines and Honeywell’s fabrication of avionics and non-avionics parts for big planes.

U.S. regulators already have approved the $42-billion merger.

In a formal document to the company this month, the commission raised strong questions that the purchase of Honeywell may harm rivals unfairly in violation of competition rules.

But GE plans to argue in a wide-ranging presentation on the first day of the hearing that many facts used by the commission need correcting and that its economic theory is flawed.

The U.S. company plans to offer no concessions, such as selling off parts of the combined business or changing its business practices, the sources said. The company will have a full month after the hearing to develop concessions if they become necessary, but for now, its legal sources expressed confidence.

“None of the many lines of argument and theory pursued by the commission actually appear to be supported by fact or follow right through to the end,” said one of the sources, who added that once the commission has the full facts, “we’re confident that they will come to a different conclusion.”

A source close to the commission said companies sometimes convince the regulators on one point or another.

In the case of GE, however, “The commission is absolutely convinced its facts are correct. They are based on an extensive analysis that lasted almost two months,” the source said.

The commission will devote the second day of the hearing on Wednesday to GE’s competitors and others. They include two makers of large aircraft engines--United Technologies Corp.’s Pratt and Whitney and Rolls Royce--and two avionics manufacturers--Rockwell Collins and Thales.

The commission must decide by July 12 whether to approve the deal, reject it or require changes for it to comply with European Union law.

Dennis Dammerman, deputy chairman of GE and the No. 2 executive behind Chief Executive Jack Welch, will represent the company today, along with numerous economists, lawyers and others.

A key issue is whether GE will bundle its engines and avionics products and offer a lower overall price than competitors, who must price their products separately.

Carl Shapiro, once the chief economist for the U.S. Justice Department’s antitrust division and now a professor at UC Berkeley, will appear on behalf of GE to argue that bundling is not a problem.

Another issue to be taken up during the hearing concerns regional jet engines, those for planes carrying 90 passengers or fewer, which are made by both GE and Honeywell.

The commission argues that the merger would concentrate the market, but GE will argue that there are in fact five different players and that the merger will not compromise competition.

The hearing also will deal with concerns about the role of General Electric Capital Aviation Services, which buys, sells and leases aircraft to airlines. The commission sees the unit as one way GE exercises its financial muscle.