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Bundling and the Ge-Honeywell Merger

The economic theory of bundling has moved from the classroom and academic journals to the public policy arena. Its debut was dramatic. On July 3, 2001, the European Commission blocked the $42 billion merger between GE and Honeywell. A primary reason for their objection to this combination was a concern over bundling. This paper uses the context of the proposed GE-Honeywell merger to address the concerns raised by bundling. We set out the theory as put forth by the Commission and try to reconcile this theory with both the economic theory of bundling and the facts of the case. We discuss what is meant by bundling and explain when it is a potential problem and when it is not. Based on this understanding, we propose anti-trust policy recommendations to deal with the novel issues raised by bundling.