U.S.: Electrolux Bid for GE Appliance Unit Will Result in Higher Prices
November 09 2015 - 6:40PM
Dow Jones News
WASHINGTON—The Justice Department jousted with Electrolux AB and
General Electric Co. on Monday during the first day of an antitrust
trial that will determine whether the companies can proceed with a
deal that could remake the U.S. appliance market.
The government is challenging Electrolux's proposed $3.3 billion
deal to buy GE's appliance business, arguing the transaction would
diminish competition and spark higher prices for cooking
appliances.
In his opening statement, Justice Department lawyer Ethan Glass
said competition between GE and Electrolux has benefited appliance
consumers for a generation. If the merger isn't stopped, Electrolux
will sell two out of every three ranges sold in the U.S. and prices
could rise by 5% or more, he said.
"That is real money that American consumers will have to pay,"
he told U.S. District Judge Emmet G. Sullivan, who is presiding
over the case.
Mr. Glass said a postmerger Electrolux and remaining rival
Whirlpool Corp. would make nearly 90% of the ranges sold in the
U.S. He offered sharp words for Whirlpool, saying the company has
been actively supporting the merger of its two largest rivals and
is cooperating with them to get the deal approved.
This type of cooperation by a direct competitor not involved in
a transaction "is unprecedented," Mr. Glass said. Whirlpool
supports the merger because the company "benefits when prices go
up," he said.
A Whirlpool spokeswoman said the company "is not a party to this
lawsuit and we do not comment on legal cases involving our
competitors."
The Justice Department's presentation on Monday focused more
heavily on the retail market than the government did when it
initially filed its lawsuit in July.
Earlier, it argued primarily that the deal would harm so-called
contract-channel purchasers, like home builders and property
managers, that buy in bulk. Mr. Glass continued to press that
argument, but he also devoted considerable time to arguing that the
transaction would hurt value-minded retail customers looking for
lower-priced cooking appliances.
Electrolux and GE said the government's case is misguided and
ignores market realities, including the increasing presence of
overseas companies like Samsung Electronics Co. and LG Electronics
Inc., brands they said are particularly popular with today's
coveted younger buyers. They also cited looming competition from
China's Haier Electronics Group and Turkey's Arcelik AS.
"New firms enter. Old firms either keep up or lose share," said
GE lawyer Paul Denis. The court, he said, could watch this
competition unfold during the holiday shopping season that will
play out alongside the trial, adding that early holiday-season
shopping data so far from Home Depot Inc. shows Samsung "is
crushing it."
The Electrolux deal, first announced in September 2014, is part
of GE's plan to shift away from consumer-focused businesses toward
tech-heavy industrial products.
"The actual marketplace facts will make it very clear that there
will not be a substantial lessening of competition," Electrolux
lawyer John Majoras told the judge. The acquisition of GE's
appliance business will give Electrolux better scale to innovate
and to cut hundreds of millions of dollars in costs, Mr. Majoras
said.
The shadow of a previous appliance industry merger, Whirlpool's
2006 acquisition of Maytag Corp., could loom over the case. The
Bush Justice Department allowed that transaction, and GE and
Electrolux believe their transaction is similar. They say history
has shown the earlier deal didn't lead to higher prices, proving
the Bush team made the correct call.
Litigated merger cases remain uncommon, even when government
officials are active with enforcement, so each case that goes to
trial carries significance. That could be especially true this
time.
A court win could give the Obama Justice Department additional
momentum as it enters a final, and perhaps pivotal, year of
reviewing mergers. The department has several other major pending
transactions on its plate, including two mergers involving four top
U.S. health insurers.
The trial is slated to last about three weeks. Judge Sullivan is
expected to rule early next year.
Write to Brent Kendall at brent.kendall@wsj.com
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(END) Dow Jones Newswires
November 09, 2015 18:25 ET (23:25 GMT)
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