Narconomics: How To Run a Drug Cartel

by Tom Wainwright

What do ordinary businesses do when regulators thwart their takeover plans? One course of action is to try a different regulator in another jurisdiction. Consider the case of a proposed merger between General Electric (GE) and Honeywell in 2000. To the horror of its competitors, GE announced that it intended to acquire Honeywell, a giant technology firm that manufactures everything from burglar alarms to helicopter parts. America’s competition authorities gave the deal the go-ahead. But GE’s rivals were not going to settle for that, so they went elsewhere, to the European competition authorities. Examining the same facts, the European commissioners reached a different conclusion: the deal was not in the interests of competition, they found, noting that Honeywell’s jet-engine business, when combined with GE’s own portfolio, could create a monopoly in some markets. GE’s rivals were thus able to block the decision of one regulator by appealing to another.