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EU objects to Boeing deal
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May 22, 1997: 7:43 a.m. ET
European Commission says deal with McDonnell Douglas is anticompetitive
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NEW YORK (CNNfn) - The European Commission formally weighed in with its "statement of objections" to the proposed $14 billion aerospace merger between Boeing Co. and McDonnell Douglas Corp.
In the statement, the EC said it was disturbed by Boeing's recent string of exclusive airplane supplier contracts, including ones with Delta Airlines, AMR Corp.'s American Airlines and a possible deal with Continental Airlines.
In addition to its antitrust concerns, the EC also voiced criticism that research and developmental funding received by Boeing and McDonnell Douglas from various U.S. governmental agencies amounts to an unfair competitive advantage to other plane makers, including Europe's own Airbus Industrie consortium.
In a statement, Philip M. Condit, chairman of Boeing, denied that the deal allows his company to grab a large slice of the aerospace market. He said that McDonnell Douglas' market share has declined in recent years and last year it accounted for only 4 percent of new sales.
Condit also dismissed EC concerns about indirect government subsidies to his firm.
"Since 1993, when we have submitted reports to the U.S. government on this issue, there have been no instances of benefits accruing to U.S. commercial airplane programs from currently funded U.S. Department of Defense or National Aeronautics and Space Administration (NASA) contracts."
The contents of the 40-page report were of little surprise to Boeing as European Competition Commissioner Karel Van Miert had outlined his opposition to the merger in the past.
While the European Commission cannot block the merger, it is relying on a treaty that allows it to take action if there is an abuse of market position. In that situation, the EC can lobby the United States to stop the merger.
It would also allow the European Union to impose a fine of 10 percent of the companies' annual sales.
If the merger were to go through despite EC objections, Boeing might find obstacles to any future dealings in Europe, including mergers or plane sales there.
While denying the deal was anti-competitive, Boeing said it would "continue to work with the EC to help the Commission better understand the data that underlies the process and the benefits that accrue to customers, suppliers, employees and shareholders." 
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Boeing
European Union
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