Mergers: Commission opens in-depth investigation into joint ventures proposed by Boeing and Embraer

boeing

(Ethan McArthur, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has opened an in-depth investigation to assess the proposed creation of two joint ventures by aircraft manufacturers Boeing and Embraer, under the EU Merger Regulation. The Commission is concerned that the transaction may reduce competition as regards commercial aircraft.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Markets for commercial aircraft need to function well to deliver innovative and efficient products to customers at a fair price. Therefore, with our in-depth investigation, we want to make sure that mergers in commercial aircraft do not significantly reduce effective competition on prices and product development.”

The planned transaction consists in the creation of:

(i)   a joint venture solely controlled by Boeing that would take over Embraer’s global commercial aircraft business (product development, production, marketing, services), and

(ii)  a joint venture jointly controlled by the two companies that would be in charge of the marketing of the Embraer KC-390 military aircraft.

The parties compete mainly in the markets for commercial aircraft. Boeing is besides Airbus one of the two leading globally active manufacturers of commercial aircraft, in particular as regards single-aisle and twin-aisle large commercial aircraft. Within the single-aisle market (100-225 seats), Boeing offers the 737 MAX family of aircraft. Embraer is the leading globally active manufacturer of regional jets and offers the E2 family of aircraft, which serve both the regional jet market (below 100 seats) and the lower end of the single-aisle market.

The Commission preliminary competition concerns

At this stage, the Commission is concerned that the proposed transaction may remove Embraer as the third largest global competitor in the already highly concentrated commercial aircraft industry. Potential entrants from China, Japan and Russia seem to face high barriers to entry and expansion and may be unable to replicate within the next five or even ten years the competitive constraint currently exerted by Embraer. The transaction may therefore result in higher prices and less choice.

In particular:

  • As regards the segment for small single-aisle commercial aircraft(100-150 seats), Boeing and Embraer have an aircraft offering that appears to target, at least to a certain extent, the same demand and customers. While they face important competition from Airbus, Boeing and Embraer also seem to engage in head-to-head competition as regards price and other parameters in important aircraft purchasing campaigns globally and in the European Economic Area (EEA).
  • As regards the overall single-aisle market (100-225 seats), Embraer has been steadily expanding its customer base as well as its technical and commercial capabilities to bring new aircraft models to the market. Despite Embraer’s comparatively small market share it also seems to exert some price constraint on the market leaders Boeing and Airbus even beyond the boundaries of the lower 100-150 seats segment. The transaction may therefore eliminate a small but important competitive force in the concentrated overall single-aisle market.

The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether it is likely to significantly reduce effective competition.

The transaction was notified to the Commission on 30 August 2019. Boeing and Embraer have decided not to submit commitments during the initial investigation to address the Commission’s preliminary concerns. The Commission now has 90 working days, until 20 February 2020, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Companies and products

Boeing, based in the US, designs and manufactures large commercial aircraft and defence, space and security systems. It also provides aftermarket services.

Embraer, based in Brazil, designs and manufactures regional and small commercial aircraft, business executive jets and military aircraft.

Merger control rules and procedure

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to the current transaction, there are two on-going phase II merger investigations: the proposed acquisition of Lotos by PKN Orlen and the proposed acquisition of Bonnier Broadcasting by Telia Company.

More information will be available on the competition website, in the Commission’s public case register under the case number M.9097.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Merkel, Mercedes and Volkswagen to abolish European democracy

Who cares about the unity of Ukraine?

Record-high number of civilian casualties in Afghanistan: UN Report

China is among the 20 most innovative economies for the first time

Main results of Asia-Europe Meeting (ASEM) – 18-19/10/2018

One small flight for a drone, one ‘big leap’ for global health

Humanitarian Aid 2016: The needs, the highlights, the crisis and the relief

Is 2019 the beginning of the end for coal in Europe?

‘Habitual residence’ rules deprive EU workers from social benefits

Ozone on track to heal completely in our lifetime, UN environment agency declares on World Day.

Making the most of our ‘extra time’ – for ourselves and society

We are ‘burning up our future’, UN’s Bachelet tells Human Rights Council

‘No steps taken’ so far to end Israel’s illegal settlement activity on Palestinian land – UN envoy

EU Commission spends billions without achieving targets

“One Belt One Road”: Its relevance to the European Companies

These 11 EU states already meet their 2020 renewable energy targets

On Human Rights Day European Youth Forum calls for end to discrimination of young people

Killing of Egyptian peacekeeper in Mali ‘may constitute war crimes’ Guterres warns, urging ‘swift action’

5G mobile is nearly here – but we should share networks to make it affordable

Sudan: UN rights chief alarmed over ‘excessive force’, alleged use of live fire against protestors

7 steps to becoming a ‘CEO Academy’

The European Sting Cookie Policy

Germany openly seeks more advantages for its banks

Palestinian students ‘compelled to drop dreams because of financial cuts’

MEPs to vote on overhaul of road transport rules in July

The Linde Group Logo (Source: The Linde Group website, Press Services, 2018)

EU starts in-depth investigation of Linde-Praxair merger over competition concerns

EU–Canada Summit: strengthening the rules-based international order

Monday’s Daily Brief: UN chief talks climate action at G7, WFP official visits camp in Central African Republic, Deadly violence at Lesvos migrant centre, Security Council meets on AU-UN Darfur mission

Bilbao’s city parks offer brain-training games for the elderly

5 factors driving the Chinese lawtech boom

MEPs adopt revised rules for road haulage operations in another EU country

“Access denied”: the Greek health system under pressure

US-North Korea summit ‘an important milestone’ towards denuclearization, says Guterres

UN chief laments ending of Cold War-era disarmament treaty

4 things to know about the state of conflict today

Global aid appeal targets more than 93 million most in need next year

FROM THE FIELD: Free tutorials in Mali, ‘a life-saver’ for Fatouma

Climate Change : An Already Health Emergency

Environmentalists have removed nearly 40 tonnes of trash from the Pacific

How can entrepreneurship tackle the migration crisis in the EU?

Crowdfunding: what it is and what it may become

Devastating storms like Hurricane Florence ‘unusual this far north’: UN weather agency

Nordic companies prove doing good is good for the bottom line

It’s time we took a seat ‘at your table’: Guterres calls on world youth to keep leading climate emergency response

This tiny new grain could save the planet

The economic cost of anti-vaccination movements in Italy

Why Europe’s high productive performance is discredited?

Does the Erasmus program really contribute to the construction of a solid EU identity?

7 amazing ways artificial intelligence is used in healthcare

Some Prevailing Arguments and Perceptions over the South China Sea Issue Are Simply Wrong

Why the UN is investigating poverty in the United Kingdom

Inegalitarian taxation on labour haunts Europe’s social model

Radio still a powerful worldwide tool for ‘dialogue, tolerance and peace’: Guterres

This cheap, 700-year old solution could change billions of lives

What if Trump wins the November election and Renzi loses the December referendum?

Let the Italians have it their way, it may be good for all Eurozone

The Council of Europe adopts Recommendation on young people’s access to rights

Infrastructure around the world is failing. Here’s how to make it more resilient

How young people are shaping the future of sustainable fashion

North Sea fisheries: MEPs back EU plan to sustain stocks of demersal species

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s