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.

the sting Milestones

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

From landlocked to land-linked: how the UN is helping some of the world’s poorest countries

Child victims of DRC Ebola outbreak need ‘special attention and care’: UNICEF

New EU rules ensure better protection for 120 million holidaymakers this summer

Island nations on climate crisis frontline ‘not sitting idly by’

Jellyfish are taking over the world – and climate change could be to blame

Joint statement following the 22nd EU-Ukraine Summit, 6 October 2020

Thailand gave healthcare to its entire population and the results were dramatic

FROM THE FIELD: Conversations about Conservation

Drinking coffee could help you live longer, research finds

Education and Training: where do we stand in 2014?

Mosquitoes kill more people every day than sharks do in a century

JADE Handover Ceremony at the European Parliement

EU-Japan trade agreement enters into force

European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

‘Global sisterhood’ tells perpetrators ‘time is up’ for pandemic of violence

Here are 4 tips for governing by design in the Fourth Industrial Revolution

Inequality triggered protests across Latin America. Here’s how the youth can help

Libya: UN Mission condemns deadly attack against police in country’s south-east

THE COMMITTEES: ‘All roads lead to the Fifth’

Thursday’s Daily Brief: dire living conditions in Idlib, migrants at US southern border, end in sight for trachoma, Human Rights Council

What happiness can teach us about how we measure human development

State aid: Commission adopts Temporary Framework to enable Member States to further support the economy in the COVID-19 outbreak

Questions and answers: Commission proposes SURE, a new temporary instrument worth up to €100 billion to help protect jobs and people in work

A new crop of EU ‘Boards’ override the democratic accountability and undermine the EU project

Giving humanitarian help to migrants should not be a crime, say MEPs

World Health Organization calls crisis meeting over deadly Ebola outbreak in DR Congo

Knowledge management and entrepreneurship: short term vs. long term perspective

UN chief urges Somalis not to be ‘deterred’ by latest deadly terror attack

UN chief welcomes announcement by Emir of Qatar to allocate $50 million to support Syrian refugees, displaced persons

De-escalation of fighting in Hodeida is key to ‘long-overdue’ restart of Yemen peace talks: UN envoy

Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

EU, Canada and China co-host international meeting on climate cooperation and a sustainable economic recovery

Why COVID-19 poses a particular threat in the world’s slums

Why Sweden’s cashless society is no longer a utopia

How to make primary healthcare a favourable career choice for medical students: Strategies and reflections

Eurozone’s sovereign debt not a problem anymore?

BRICS’ New Development Bank turns four: what has it achieved?

10 things Europe does better than the rest of the world

Women and sustainable finance: fuel for the engine of COVID recovery

Education should be like everything else. An on-demand service

5G is here: PT Expo China 2019 will be held October 31 – November 3, in association with The European Sting

EU-China Leaders’ meeting: Delivering results by standing firm on EU interests and values

‘Critical moment’ for sustainable development, UN chief tells major financing forum

Capital Markets Union: Making it easier for insurers to invest in the real economy

At UN, France’s Macron says more ‘political courage’ is needed to face global challenges

World response to AIDS epidemic at a ‘critical juncture’

Chatterbox Rome Declaration cannot save the EU; Germany has to pay more to do that

ECB indicates south Europeans can endure more austerity

Could the fourth wave of globalization help to end epidemics?

EU defence gets a boost as the European Defence Fund becomes a reality

Illegal fishing: EU lifts Taiwan’s yellow card following reforms

7 lessons leaders should take from the COVID-19 crisis

OECD sees global growth slowing, as Europe weakens and risks persist

Using the quarantine to your advantage

Why exporters need to mind the trade finance gap

Joint UN, OSCE engagement can address crisis in Ukraine, other ‘dark spots of conflict’ in Europe

More urgency needed to help increasing numbers ‘locked out’, before 2030, says UN’s Bachelet

State aid: Commission approves Belgian scheme deferring payment by Walloon airports of concession fees to mitigate economic impact of coronavirus outbreak

The EU Parliament sidesteps the real issues about banks, while the US target the Eurozone lenders

What do refugees really need from those who want to help? A refugee explains

More Stings?

Advertising

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