EU to examine Boeing merger

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A fresh and damaging trade war was threatening to break out last night between Europe and the US after Brussels warned that it would examine the Boeing-McDonnell Douglas merger with "a fine toothcomb" and impose sanctions if it hurt competition in Europe.

Karel van Miert, the EU's Competition Commissioner, said the $45bn merger unveiled on Sunday night was "complex and problematic" and left observers in no doubt that Europe could ultimately block the deal if the two US aerospace groups failed to answer competition concerns. "It seems to us that it may raise questions regarding a dominant position," Mr van Miert told a news conference in Brussels. He expected the two companies to submit the deal for approval in January.

The Commission's swift reaction to the deal was being interpreted last night as a politically inspired move to defend the interests of Airbus Industrie, the four-nation European aircraft maker in which British Aerospace has a 20 per cent stake. "I find it hard to believe that the EU is a neutral party. It has an interest in promoting the European industry, in promoting Airbus," said one antitrust lawyer.

However, Airbus has already shrugged off the competitive threat posed by the merger, dismissing McDonnell Douglas as an "also ran".

Although the combined company would account for just under 70 per cent of world airliner deliveries, Boeing, which is in effect taking over McDonnell Douglas, already has more than 60 per cent of the market. Many observers believe the merger will enhance the competitive position of Airbus because airlines will be anxious to ensure they have a choice if the number of manufacturers of large commercial aircraft falls to two.

Under EU law, the Commission's mergers taskforce is entitled to vet any deal where the European turnover of the parties involved is above a certain level.

There is a precedent for Mr van Miert's warning. A year ago the Commission forced two US paper makers, Kimberley Clark and Scott Paper, to dispose of businesses in Britain and Ireland as the price for approving their merger.

The Commission has intervened before in a deal involving Boeing, blocking the sale of its regional aircraft subsidiary, de Havilland, to Aerospatiale of France and Italy's Alenia.

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