Joint ventures proposed by General Electric and Pratt & Whitney to develop an engine for the stretched B747X, and a possible alliance between McDonnell Douglas and Dasa to work on the Airbus A3XX, pose questions about how antitrust laws apply when rivals retain separate identities but pool efforts.
Antitrust lawyers warn that both would face strict scrutiny because they are in industries already concentrated with little chance of new entrants. 'Effect on competition is the key to analysing any joint venture,' says Mark Hough, a former Federal Trade Commission lawyer now practising in Seattle.
The McDonnell Douglas-Dasa proposal would raise fewer concerns than GE-P&W simply because no airframe manufacturer seems willing to develop a 650-seat commercial jet on its own, although Airbus and Boeiong may both build 550-seaters. Even if the market for such an aircraft is only big enough for one, then Hough says a joint venture to build it would not lessen competition.
The GE-Pratt venture is a closer call because the size of the market may support competing models. GE and Pratt complain that Boeing's demand for a 10 per cent cut in engine operating costs compels them to pool efforts. They say derivatives of current models cannot meet that, thus forcing them to a new engine costing at least $1 billion to develop. Yet, Rolls Royce says it can and will offer a derivative of its existing Trent engine for the larger B747s.
Regulators will thus question why the costs and risks force GE and Pratt to work together, and how much their real aim is to out-do Rolls Royce.
David Knibb
Source: Airline Business
