By Brent Kendall And Ted Mann
Justice Department antitrust enforcers on Wednesday filed a
lawsuit seeking to block Electrolux AB's proposed $3.3 billion
acquisition of General Electric Co.'s appliance business, saying
the deal would suppress competition and hurt consumers.
The lawsuit is the latest signal that as companies ride the
current wave of mergers and acquisitions, U.S. antitrust officials
are standing by to challenge transactions they believe go too far
in consolidating industry sectors.
Wednesday's lawsuit on the Electrolux deal also is the latest
antitrust headache for GE, which is seeking to shed certain
subsidiaries that aren't core to its business and looking to buy
others.
The company is facing separate headwinds in Europe over a
proposed deal in which it is seeking to buy Alstom SA's power
turbine and grid business. European competition enforcers have
raised concerns about that deal, and the head of GE's power
business is expected to meet with officials in Brussels
face-to-face Thursday in an attempt to address those concerns.
GE and Electrolux announced their proposed tie up in September
2014.
The Justice Department filed a 15-page legal complaint
challenging it in a Washington, D.C., federal court, saying the
acquisition would likely lead to "less competition, higher prices
and fewer options for millions of Americans who buy major cooking
appliances each year."
The department also alleged the deal would create a duopoly
between Electrolux and Whirlpool in the supply channel of kitchen
appliances to home builders, property managers and other contract
purchasers. Few appliance suppliers can meet the demands of these
customers, the department said, adding that any increase in
appliance prices could be passed along to home buyers or
renters.
The companies pledged to battle the government vigorously.
Electrolux said the acquisition will increase competition and
give consumers greater product choices at a wider range of
competitive prices. "We believe this acquisition accelerates
consumer innovation, which improves the industry as a whole, and
results in more consumer choice than ever," Keith McLoughlin,
president and chief executive of Electrolux, said in a
statement.
Washington antitrust lawyer Joe Sims, representing Electrolux,
said the companies and the Justice Department have engaged in
settlement discussions, but those talks haven't been successful so
far. The companies remained open to reaching an accord, he
said.
Mr. Sims said the department's lawsuit was inconsistent with the
department's decision under the Bush administration in 2006 to
approve Whirlpool's acquisition of Maytag. The market has gotten
more competitive in the decade since, thanks to the rise of
appliance models from other suppliers like Samsung and LG, he
said.
GE said in a statement that it "continues to believe that GE
Appliances' customers, consumers and employees will benefit from
Electrolux's commitment to the appliance business and its ability
to compete with global competitors."
On GE's Alstom deal, European Commission regulators have raised
concerns about the transaction, saying it would reduce from three
to two the number of major players selling heavy-duty gas turbines
in Europe.
GE has said it is willing to accept some concessions to make the
Alstom deal work, including possibly selling off some intellectual
property it receives from Alstom. But Chief Executive Jeff Immelt
has drawn the line at giving up any of the service revenue GE hopes
to rake in from Alstom's existing installed base of turbines, the
large machines at the heart of gas- and coal-fired power
plants.
The regulatory maneuvering comes against the backdrop of a boom
in mergers and acquisitions. Global deal activity totaled $2.19
trillion in the first half of 2015, a figure that puts the year on
track to challenge the 2007 deal-making record. And the first day
of the third quarter kicked off with another big deal, the largest
on record in the life and property-casualty insurance industries,
with ACE Ltd. agreeing to buy Chubb Corp. for $28.3 billion.
Government antitrust scrutiny has been the downfall of several
deals in recent months. The Federal Trade Commission last month won
a court ruling against the merger of rival food distributors Sysco
Corp. and US Foods, which abandoned their deal on Monday.
Comcast Corp. walked away from its planned acquisition of Time
Warner Cable Inc. in April, in the face of opposition from the
Justice Department and the Federal Communications Commission.
Applied Materials Inc. abandoned its deal to acquire Tokyo Electron
Ltd. after the department objected.
Write to Brent Kendall at brent.kendall@wsj.com and Ted Mann at
ted.mann@wsj.com
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