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Playing Hardball Could Haunt U.S. Fight With Eu Over Boeing Deal May Affect Future Antitrust Decisions

Bob Drummond And Anne Marie Squeo Bloomberg News

The U.S. government’s aggressive stance during Boeing Co.’s antitrust showdown with the European Union could come back to haunt U.S. officials the next time they try to impose conditions on a foreign company, legal experts said.

When top U.S. officials, from President Clinton on down, pressed their European counterparts to clear Boeing’s acquisition of McDonnell Douglas Corp. amid ominous talk of a trade war, antitrust experts say the U.S. government left itself open to questions about whether it let politics and trade concerns interfere with objective antitrust enforcement.

That’s an unusual reversal, legal experts say, of the far-more-common situation in which U.S. authorities use U.S. law to question mergers between overseas companies.

“In the past, it’s always been the U.S. doing these kinds of things to other people. This sort of turned things on their head. It’s got to raise questions about how much politics is mixed in with big-time merger enforcement,” said Donald Baker, former head of the Justice Department’s antitrust division.

“It does weaken the international enforcement of antitrust laws,” said Washington antitrust lawyer Lewis Noonberg. “You’re going to find that countries will be less cooperative as a result of the actions of the U.S. on this one. I can’t imagine that this won’t affect our ability (to take action) when foreign companies have an antitrust issue that bothers us.”

In recent years, U.S. antitrust officials at the Federal Trade Commission and the Justice Department have touted the need for greater international cooperation in antitrust enforcement, as a global marketplace prompts more mergers, partnerships and competition across national boundaries. The U.S. and Europe struck a 1991 agreement that laid down formal procedures for cooperation, while still leaving each side free to enforce its own laws.

Differences between those laws were highlighted in the Boeing-McDonnell Douglas flap, antitrust experts say, and showed how antitrust enforcement - supposedly a neutral law enforcement action - can become entangled in tough and often emotional issues about export trade, manufacturing jobs, national defense and national pride.

“U.S. antitrust authorities look at efficiency and consumer welfare and don’t worry about what a merger will do to a competitor. The Europeans look at a broader range of things, but it’s their law that obliges them to do that. And adverse affects on a competitor can be a factor for them,” said Lawrence Sullivan, an antitrust law professor at Los Angeles’s Southwestern University School of Law.

“The Europeans were really in a pretty strong legal position, under their laws. But then politics got involved.”

The U.S. reaction to the European antitrust review, lawyers say, could undermine U.S. authorities the next time they claim to be objectively applying U.S. antitrust law to foreign companies that do business here.

“The Boeing case has proven that, despite the rhetoric, the U.S. is not above getting involved in the political fray,” said Washington antitrust lawyer Keith Shugarman.

The White House’s decision to have Justice Department antitrust chief Joel Klein lead a delegation to Brussels to express concern about the U.S.’s national interests in the combination, could weaken the U.S. hand down the road, experts say.

“It’s going to come back to haunt the Justice Department in particular,” Shugarman said. “The next time there’s a cartel outside the U.S. that the Justice Department wants to proceed against, foreign authorities are going to question why the U.S. is punching their companies around.”

Dan Tarullo, the top international economist at Clinton’s National Economic Council, rejected the notion that the White House put political pressure on European authorities, saying the president’s concern was to keep politics out of antitrust enforcement.

“This is critical to assuring competitive markets. We don’t want to see a setback in cooperation of antitrust authorities,” Tarullo said.

U.S. government officials downplayed possible future problems down the road, and insisted that Boeing’s negotiated agreement with the European Commission shows that international cooperation can work.

“I share the sense of relief of everybody that the parties were able to work it out,” said FTC Chairman Robert Pitofsky, whose agency gave the Boeing acquisition plan a goahead under U.S. antitrust laws.

“The problem would have been if this led to undermining what has been an extraordinary improvement in coordination and cooperation between the U.S. and the EU, and the fact that we’ve apparently avoided that is a good thing,” Pitofsky said. “My hope, and I think my expectation, is that with this thing resolved … we can continue efforts to try to keep each other informed and work together.”

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