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Monday, May 25, 2020  Spokane, Washington  Est. May 19, 1883
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Europe Still Fretting Over Boeing Merger Despite Approval Of Deal By U.S. Federal Trade Commission

By The Seattle Times

The European Commission still has serious concerns about the merger between Boeing and McDonnell Douglas, even though the Federal Trade Commission cleared the way for the biggest aerospace alliance in history.

“The FTC’s decision does not alter, in any fashion, the serious concerns expressed by the European Commission,” according to a statement issued Wednesday from the commission’s office in Brussels, Belgium.

The commission is expected to rule on the merger by July 31. It has mentioned several concerns about the merger, including Boeing’s exclusive supply contracts with three U.S. airlines, indirect U.S. subsidies flowing from military contracts into commercial aircraft and Boeing’s dominant market position.

The commission has claimed the right to review the U.S. merger because of its impact on the European marketplace. Under a 1991 U.S.-European agreement, the United States has recognized that right.

If the commission rejects the merger, it could impose sanctions, including enormous fines, and prevent Boeing from selling its airplanes in the European market. Such a move could potentially trigger a trade war between the United States and Europe.

The FTC approved the $14 billion merger Tuesday without conditions. The commissioners, who voted 4-1, said McDonnell Douglas was no longer a competitive force in the commercial aircraft market.

Some members of the European Commission - the executive arm of the 15-state European Union - rejected the FTC argument.

“Even if McDonnell Douglas was no longer a viable competitor on a stand-alone basis, its competitive potential, taken over by Boeing, would considerably strengthen Boeing’s already existing dominant position in the market for large commercial aircraft,” the statement said.

According to the commission’s figures, McDonnell Douglas’ share of the global in-service aircraft fleet is 24 percent. The merger would give Boeing access to its former rival’s service contracts and spare parts.

Karel Van Miert, the European commissioner in charge of competition, already has expressed his concern about Boeing’s exclusive supplier contracts with American, Delta and Continental airlines. The commission fears those deals will increase Boeing’s share of the world airplane market from 64 percent to 70 percent.

“The commission is concerned that the merger would enhance Boeing’s capability to enter into further exclusive deals in the future,” the statement said.

The commission reiterated its concern over the amount of indirect government subsidies that could benefit Boeing once it owns McDonnell Douglas, the second-largest U.S. defense contractor.

It says Boeing has access to the U.S. Defense Department and NASA, both of which spend millions on aeronautical research and development.

With the large increase in Boeing’s defense and space business, the commission fears Boeing could strengthen its dominant position in commercial aircraft through government technology transfers and research, a term the commission describes as a “spill-over effect.”

Boeing sent executives back to Brussels last week in an attempt to allay European concerns on these issues. Boeing declined to discuss the details of those meetings.

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