NEW YORK (TheStreet) -- As General Electric (GE) - Get Report gears up to fight a federal lawsuit attempting to block the $3.3 billion sale of its home-appliance business to Electrolux (ELUXY) , it may get a helping hand from the Maytag Man.
Or more specifically, from a deal involving the company that made the TV commercial character famous: The purchase of Maytag almost 10 years ago by Whirlpool (WHR) - Get Report, which fended off a Justice Department review of the transaction as potentially anti-competitive.
Electrolux shares entered a sustained tailspin when the Justice Department announced its suit on Wednesday, falling 12% by early afternoon on Monday. The September deal had been trumpeted as Electrolux's largest acquisition to date and would have granted North Carolina-based Electrolux North America -- owner of the Frigidaire brand -- broad access into the U.S. market. GE shares were little changed.
The Justice Department contends the deal would harm American families, many of whom view appliances as major purchases, by giving Electrolux unfair sway in the $4 billion-a-year U.S. market for cooking appliances.
Whirlpool, the largest appliance maker in the U.S. faced a similar concern from Justice when it attempted to pick up Newton, Iowa-based Maytag, which ranked third at the time, with roughly 33% of its suitor's $15 billion in sales.
The Justice Department's Antitrust Division eventually determined in 2006 that Whirlpool, based in Benton Harbor, Mich., would not be able to raise prices unfairly, in part because its rivals in the U.S. and abroad were effective counterweights that could increase output and pull prices down.
"There is untapped capacity at the manufacturing plants now operated by current U.S. suppliers, such as GE and Electrolux," the Antitrust Division said at the time.
Today, GE and Electrolux are hoping to play the same cards in the cooking appliance market. Two chief contentions include that U.S. customers have filed no complaints and the probe is based on statistical and unreliable measures of anticompetition, including the Herfindahl index, a financial formula used to derive market shares and common in antitrust law, according to Joe Sims, an antitrust attorney with Electrolux.
"Those of you who are familiar with DOJ complaints will see this is a little unusual," Sims said in a Wednesday media call. "You don't see any quotations from bad documents" or indications of complaints, he said.
Sims said the dispute and numbers are "very similar" to those of Whirlpool and Maytag. The companies hope to resolve the case by the end of this year, according to Sims. GE has said it will "vigorously defend" the deal.
"In the vast majority of cases, companies make concessions and get things to go through," Keith Hylton, a professor with Boston University Law School, said in a phone interview with TheStreet. "If they don't make concessions, they usually drop the merger because it's not worth litigating."
Based on 2013 figures, Whrilpool was the market leader in U.S. appliances, with a 40% share, while Fairfield, Conn.-based GE and Electrolux maintained a combined 37%, according to Nicholas Heymann, an analyst with William Blair.
"I'm scratching my head trying to figure out what this is all about," he said in a phone interview. The Justice Department "obviously approved Whirlpool's ability to amalgamate, and Maytag's and many others, on the basis of the rising global nature of supply to the U.S. market. Things like this should be evaluated on a global basis."
While the market shares have been disputed, the federal suit alleges that Electrolux, GE and Whirlpool are the clear market leaders for U.S. home appliances, with GE and Electrolux alone constituting 90%. Electrolux said thate figure is a vast overestimate.
A key argument in GE's favor will be the increasingly global nature of the market, said Hylton.
"It includes other competitors and larger geographical scope than the DOJ is looking at and that includes many more firms around the world and other types of suppliers that ought to be taken into consideration," he said.
General Electric and Electrolux will also aim to convince federal regulators that a merger would benefit U.S. households, as a combined entity could increase efficiency and perhaps offer cheaper prices at the counter, Hylton said.
"With every merger that gets challenged, those are the two main parts," he said. "Increasingly it's the consumer-benefit argument that firms will have to rely on because market competition arguments are too unreliable."