Honeywell-DuPont Coolant Deal Said to Face EU Objections

Honeywell International Inc. and DuPont Co. face a European Union complaint for violating antitrust rules over the only car coolant chemical that currently meets new EU standards on greenhouse-gas emissions.

The EU’s antitrust arm may send the so-called statement of objections as soon as next month, said two people familiar with the probe who asked not to be named because the process is private.

It’s a new twist in a long-running EU saga over the HFO-1234yf chemical -- expected to be a cash cow for DuPont and Honeywell as it replaces ozone-depleting alternatives that can’t be included in new vehicles sold in the 28-nation EU starting in 2017. EU industry officials have clashed with Germany after Daimler AG refused to use the product for safety reasons.

The antitrust complaint will escalate a probe opened in 2011 that targeted Honeywell and DuPont’s pact to develop the chemical. The investigation, triggered by French company Arkema SA, also examined Honeywell’s alleged “deceptive conduct” when the product was endorsed by a car-industry trade group, and whether it charges “fair and reasonable” license fees to rivals who want to produce the product.

The new chemical “is currently considerably more expensive” than its predecessor, said David Smith-Tilley, a director at IHS Automotive, a car-industry consultancy, in London. “With patent-protected supply plus a more expensive manufacturing process, a price premium will exist for some time” he said.

$1.5 Billion

Honeywell, based in Morris Township, New Jersey, said last year it’s targeting $1.5 billion of revenue from the chemical over five years.

“Honeywell is confident that our practices are consistent with the law and that the commission will conclude that we acted in full compliance with European Union competition rules,” Martin Orsag, a Prague-based spokesman for the company, said in an e-mailed statement.

DuPont is working to ensure European authorities “understand the benefits of this technology, the competitive landscape, and the details of our relationship with Honeywell,” said Janet Smith, a spokeswoman for the Wilmington, Delaware-based company. “We are confident that these authorities will ultimately conclude that actions taken by DuPont complied with applicable laws.”

Antoine Colombani, a spokesman for EU Competition Commissioner Joaquin Almunia, declined to comment.

The EU investigation, which may lead to fines of as much as 10 percent of a company’s yearly sales, coincides with EU demands for Germany to apply EU environmental rules that mandate lower greenhouse gas emissions for cars. Germany backs Daimler’s refusal to use the chemical.

Older Refrigerant

Sales of Daimler cars in France were temporarily blocked last year over their use of the older refrigerant. A French court later overturned the suspension. Daimler is working on an alternative product using CO2, which it wants to implement “as soon as possible,” Matthias Brock, a Daimler spokesman, said in an e-mailed statement.

Refrigerants are non-corrosive chemicals that can be readily compressed into liquids and expanded into gas, creating cold temperatures. The DuPont-Honeywell product is designed to cut the global-warming potential of mobile air-conditioning systems.

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