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The paper argues that—in contrast to the decision of the European Commission in 2001 and the ruling of the Court of First Instance in 2005—the merger between General Electric and Honeywell International would not have led to anti-competitive horizontal effects. Applying the European Community Merger Regulation valid at the time of decision and empirical evidence available in 2001, the relevant markets are defined taking into account demand-side substitutability and supply-side substitutability. The worldwide bidding markets for large regional jet aircraft engines, corporate jet aircraft engines and small marine gas turbines are characterised by potentially volatile market shares, high importance of after-sales revenue and profitable outside options. According to the two-level approach of the European Commission, the analysis considers firstly the competitive situation of the engine manufacturer in relation to its direct customer, the aircraft or marine vessel manufacturer, and secondly the competitive effects in the respective market of end-use applications. The paper shows that GE was not in the position to exert market power prior to the merger and would not have been ex post.
