No matter what the fine print of European legislation may say, the proposed merger of two US companies is not a European matter. What is a European matter is how those merged companies go on to behave in the market in Europe or, indeed, the world. The response of a divided, disorganised European industry to the merger is also a European matter. So why is Karel Van Miert, the European Union's (EU's) competition commissioner, trying so hard to get involved in the proposed non-European merger of Boeing and McDonnell Douglas?
Apparently, he feels that the merger is not in line with European merger regulations. It is the merger of two US-domiciled corporations, the operations of which are overseen by the competent authorities of the USA, and theirs is the only system under which the merger should be judged. If US anti-trust regulators agree that the merger complies with US legislation, then the merger must be approved. It may be useful for the EC to advise the US authorities about its likely concerns over the merger - such as its
understandable doubts over Boeing's recent attempts to tie in US customers with "exclusive" aircraft deals - but the final terms on which the merger finally goes ahead is not ultimately up to Van Miert. It is down to the US authorities.
The point at which the EU can legitimately become involved is when the merged company commences trading in Europe and against European competitors. Not to pass judgement on the acceptability of what will, in all fairness, be a giant among companies, but to maintain a watch on the way in which it does business.
Should such a powerful company use its global strength to dump its product unfairly on the European market, the EU would have a duty to move to stop it by whatever legal means available. Should this powerful company try to use its might to freeze European companies out of its massive domestic market, then the EU would also have legitimate grounds for complaint. Should that company use unfair practices in competing with Europeans on the rest of the world market, again the EU would have just cause for complaint. In any of these circumstances, there would doubtless be grounds for endless debate on what constituted fair or unfair use of the power that such a merger would confer upon the company. The EU would be expected to contribute to that debate, just as the US Government could legitimately be expected to contribute to a debate over the fairness with which a legitimate European merger of, say, Aerospatiale, Dassault and Thomson would trade in the world market.
If Van Miert is really concerned with unfair competition in the aerospace industry, he has examples of unfairness much closer to home. He could look at continued state ownership and subsidy of major manufacturing companies. He could also look at the blatant protectionism indulged in by some European airworthiness authorities which insist on unjustified modifications to non-European aircraft types which have been operated safely for years in other parts of the world.
If, on the other hand, he still wants to have a say in the aftermath of the Boeing/McDonnell Douglas merger, perhaps he could try promoting the competitiveness of the European industry, rather than trying to reduce the effectiveness of other countries' industries. He could devote his department's energies to making it possible for European countries to set up genuine cross-border mergers and take-overs. He could devote those energies to promoting harmonisation of tax and investment structures, so that instead of European countries competing with each other for inward investment, they could start competing with the outside world using the results of that investment instead.
There can be no doubt that the European aerospace industry now depends for its very survival in world markets on amalgamation and rationalisation. The EU can help in achieving that goal - but it must do that by creating the right environment for the European industry to flourish, not by trying to protect it through seeking to damage the legitimate businesses of others. Boeing/McDonnell Douglas will be big, but Europe can compete with it: the EU should ensure that Europe does so fairly.
Source: Flight International
