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Boeing / McDonnell Douglas

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Background

This case sparked a level of political tension not previously seen in relation to global mergers. The merger in this case was ultimately approved by both the US and the EU, but only after certain concessions were made at the behest of the EC.

The case involved a proposed merger between two US companies, Boeing and McDonnell Douglas. The relevant market was the world market for large commercial jet aircraft. At the time Boeing was the largest company in the market for commercial aircraft (approximately 64% of sales). The only other significant rival was the European corporation, Airbus Industrie (approximately 30% of the market). McDonnell Douglas accounted for the remaining 6% of the market. There was evidence McDonnell Douglas' share was decreasing while Airbus' share was increasing. Barriers to entry were extremely high.

The US FTC (by majority) approved the merger after evaluating more than 5 million pages of documents and conducting numerous depositions. The majority concluded that 'the acquisition would not substantially lessen competition or tend to create a monopoly in either defense or commercial aircraft markets' (Federal Trade Commission, ‘Statement of Chairman Robert Pitofsky and Commissioners Janet D Steiger, Roscoe B Starek III and Christine A Varney in the Matter of the Boeing Company/McDonnell Douglas Corporation, File No 971-0051’ (1 July 1997)). The majority claimed not to have been influenced by a 'national champion' argument, which they rejected as 'almost certainly a delusion', instead stating that their decision was based on evidence that McDonnell Douglas 'no longer constitutes a meaningful competitive force in the commercial aircraft market' and that that prospect was not likely to change.

The EC, which shared information with the US during the review period, expressed concerns about the merger and issued a Statement of Objections. It concluded that the 'proposed concentration would lead to the strengthening of a dominant position through which effective competition would be significantly impeded in the common market' and expressed particular concern about Boeing's 'ability to use the deteriorating Douglas commercial operations and MDC's military programs to fortify its dominance in commercial aircraft.' (Eleanor Fox, ‘Antitrust Regulation across National Borders: The United States of Boeing versus the European Union of Airbus’ (1998) 16 The Brookings Review 30 and Commission Decision of 30 July 1997 declaring a concentration compatible with the common market and the functioning of the EEA Agreement, Case IV/M877 [1997] OJ L/336/16, para 113)

Following negotiations between American and European officials and the parties, the Commission approved the merger subject to concessions, including that Boeing give up certain long-term exclusivity contracts and that they licence to its competitors (Airbus) 'McDonnell technology developed with US government funding.' (Commission Decision of 30 July 1997 declaring a concentration compatible with the common market and the functioning of the EEA Agreement, Case IV/M877 [1997] OJ L/336/16, part IX)

 

European Commission

TBA

 

United States

The US FTC (by majority) approved the merger, stating that 'the acquisition would not substantially lessen competition or tend to create a monopoly in either defense or commercial aircraft markets' (see Federal Trade Commission, ‘Statement of Chairman Robert Pitofsky and Commissioners Janet D Steiger, Roscoe B Starek III and Christine A Varney in the Matter of the Boeing Company/McDonnell Douglas Corporation, File No 971-0051’ (1 July 1997)). The majority claimed not to have been influenced by a 'national champion' argument, which they rejected as 'almost certainly a delusion', instead stating that their decision was based on evidence that McDonnell Douglas 'no longer constitutes a meaningful competitive force in the commercial aircraft market' and that that prospect was not likely to change.

Commissioner Mary L Azcuenaga dissented: Federal Trade Commission, Statement of Commissioner Mary L Azcuenaga, File No 971-0051 (1 July 1997)

 

Cooperation

TBA

 

Articles and news about this case

Eleanor Fox, ‘Antitrust Regulation across National Borders: The United States of Boeing versus the European Union of Airbus’ (1998) 16 The Brookings Review 30

William E Kovacic, ‘Transatlantic Turbulence: The Boeing-McDonnell Douglas Merger and International Competition Policy’ (2001) 68 Antitrust Law Journal 805

Kathleen Luz, ‘The Boeing-McDonnell Douglas Merger: Competition law, parochialism, and the need for a globalized antitrust system’ (1999) 32 The George Washington Journal of International Law and Economics 155

Sondra Roberto, ‘The Boeing/McDonnell Douglas Merger Review: A Serious Stretch of European Competition Powers’ (1998) 24 Brooklyn Journal of International Law 593

Steve Rolinitis, The Boeing & McDonnell Douglas Merger, 17 April 1997 (Report prepared for Dr David Loomis, Illinois State University).