Magazine article Brookings Review

Antitrust Regulation across National Borders: The United States Boeing versus the European Union of Airbus

Magazine article Brookings Review

Antitrust Regulation across National Borders: The United States Boeing versus the European Union of Airbus

Article excerpt

There was a certain irony when President Clinton threatened in July to go to the World Trade Organization if the European Union moved against Boeing's acquisition of McDonnell Douglas. * "I'm concerned about what appears to be the reasons for the objection to the Boeing-McDonnel Douglas merger by the European Union," the president said, "and we have some options ourselves when actions are taken in this regard." The president was apparently referring to retaliatory trade sanctions against Europe, such as putting U.S. tariffs on European planes.

There was a brisk run up to the brink. High U.S. official, up to and including the president, called or met with high officials in Europe to force a retreat. At the eleventh hour the Europeans did back down (or did they?). They let the merger proceed, but on two important conditions: Boeing would give up exclusivity on long-term supply dales, and Boeing would license to its competitors--that is, Airbus--McDonnell technology developed with U.S. government funding.

Just another trade case with a fairly happy ending? So the press and popular view would have it. Indeed, in the popular view this was a festering trade war triggered by European Competition Commissioner Karel van Miert, who was determined to protect Europe's subsidized Airbus from the competition that would be waged by a stronger Boeing. Europe took the first shot by threatening to ground the merger. In the name of its honor, its standing, and its economy, the United States had to fight back.

But wait a minute. Is something wrong with this picture? Is this not the merger of two of the last three firms in the highly concentrated commercial jet aircraft market? Is this not the administration that has threatened to sue Japanese glass makers for keeping American exporters out of Japan; that has sued two Swiss companies for merging in Switzerland; and that has (though I should not say it in the same breath) signed into law the Helms-Burton bill that penalizes foreign countries engaging in business in Cuba? Is this the administration that has temporized with the European Union's proposal for internationalizing antitrust on grounds that antitrust issues do not belong in the WTO, lest U.S. sovereignty get compromised? Is Boeing-McDonnel Douglas not an antitrust case, or has antitrust gone the way of politics?

In the aftermath, few Americans or Europeans believe that the Boeing affair was anything other than political. Most Americans believe the skirmish was a game of the Europeans to protect their champion Airbus. Most Europeans believe it was a game of the Americans to protect their champion Boeing.

Can it be that Boeing-McDonnell Douglas was a serious antitrust case dealt with in good faith on the merits by the expert agencies on both sides of the Atlantic and that the problem was one not of offensive intrusions meriting retaliation but of slightly divergent law in need of sympathetic links? Yes, it can be; and that is my thesis.

It is worth comparing the law of the United States with the law of the European Community, examining the divergences, and asking how Boeing-McDonnell Douglas might have been an antitrust case, start to finish, rather than a trade ware.


The U.S. and EU authorities reached different conclusions on the competitive effect of the merger. Why? Cynics find it obvious. The Federal Trade Commission's allowing the merger promoted the U.S. champion, and the European Community's challenging the merger promoted the European champion. But this simple, obvious answer is almost surely wrong. Each set of experts appeared to apply the law on the merits.

This was possible both because there was an arguable question of fact and because of differences in the law.

The question of fact involved a prediction: was McDonnell Douglas still a competitive force in commercial jets? Would it ever again, on its own or with a new parent, be able to make and sell fleets of jets to the commercial airlines? …

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