NEW YORK (AP) - The U.S. government is seeking to stop Electrolux from buying General Electric's appliance division, saying the combined company would dominate sales of ovens and other cooking-related kitchen appliances, especially to customers like home builders, property managers, hotels, and governments.
NEW YORK (AP) — The U.S. government is seeking to stop Electrolux from buying General Electric's appliance division, saying the combined company would dominate sales of ovens and other cooking-related kitchen appliances, especially to customers like home builders, property managers, hotels, and governments.
General Electric Co. and Electrolux said they will defend the $3.3 billion sale in court and aim to complete it this year. The companies announced the deal in September.
The U.S. Department of Justice filed suit Wednesday asking a U.S. District Court in Washington, D.C., to block the sale. The agency said the deal would eliminate a major competitor and leave Electrolux and Whirlpool as the only big companies in the U.S. selling cooking appliances such as ovens and ranges. Electrolux sells most of its products in the U.S. under the Frigidaire brand.
The Justice Department is particularly concerned about "contract channel" sales, where suppliers sell to homebuilders; to the builders and managers of apartment buildings and condominiums; to hotels and motels; and to governments. It said Electrolux has made major efforts to win more contract channel business over the last decade, but is now seeking to acquire GE's business instead of competing with it.
GE began to look for a buyer for its appliance division in part because of increasing competition, though, especially from up-and-coming Asian brands like Samsung and LG. GE and Electrolux will argue that the competitive landscape of the past is very different from the one they are now facing as these newer brands push into the U.S. market.
The Justice Department is relying on numbers "that don't predict very well what could happen," said Joe Sims, an antitrust lawyer at Jones Day who is representing Electrolux. He spoke on a conference call with reporters. Samsung and LG have increased their market share to 20 percent of the large appliance market from almost nothing a decade ago, Sims said.
Sims also said that the big buyers of these appliances, retailers such as Home Depot and Best Buy along with major home builders, are so powerful that they pressure manufacturers to keep prices low and competition fierce.
Electrolux said in a statement that the Justice Department's lawsuit runs counter to its decision to approve Whirlpool's acquisition of Maytag in 2006. Similar anti-competitive concerns were raised then by Justice Department staff, because Maytag was a major Whirlpool competitor, but the department leadership declined to try to block the sale.
Electrolux is based in Stockholm, and the deal would be its largest acquisition ever. Electrolux is ranked as the world's second biggest home appliance maker after Whirlpool.
GE CEO Jeff Immelt is trying to reposition GE into a more-focused conglomerate that manufactures and services big, complex equipment such as aircraft engines, locomotives, medical imaging machines and oil and gas drilling equipment. It sold NBCUniversal to Comcast Corp. and also sold its insurance operations, spun off its consumer credit card business into a new company called Synchrony Financial, agreed to sell its GE Capital lending business and most of its GE Capital Real Estate unit and said earlier this month that it will sell its private equity business.
Shares of GE rose slightly Wednesday, closing up 9 cents to $26.66.