Van Mierts apparent determination to challenge the deal, worth $13.3billion when announced in December, has triggered a bitter transatlantic war of words. The two aerospace companies have accused him of exceeding his authority and showing bias, while a group of US senators have told President Bill Clinton that Van Miert is prejudging the case.
The commissioners tactics are also stretching nerves in Brussels. He announced an investigation into the deal before his advisers were certain it came under EU merger regulations, and has since openly paraded his concerns about it in the US and Europe. He is skating on pretty thin ice by talking tough before the investigation has been completed, says an EU official.
Van Miert is standing his ground. He insists that EU law requires him to vet the merger and entitles Brussels to block it if found anti-competitive. If the companies ignored a veto, the Commission could declare the merged group illegal, place restrictions on its business in Europe and fine it up to 10 per cent of its estimated $48 billion annual turnover.
Boeing has said EU prohibition of the merger could provoke a trade war. Many European diplomats privately agree. Says one, The fall-out could make the recent EU-US dispute over the Helms-Burton anti-Cuba law look like a sideshow.
The commercial stakes involved are vast. The merger would consolidate Boeings leadership of the world civil aircraft market, leaving Europes four-nation Airbus consortium as its sole rival. The deal would also create a powerful US defence group, likely to compete fiercely with European companies for international business.
Many industry observers think Van Mierts hard line is intended to bluff or bully Boeing and McDonnell into making concessions. Since the Commission acquired authority in 1990 to vet all big mergers which could affect EU-wide competition, it has rarely vetoed deals. Instead it has preferred to persuade companies to modify their terms by, for example, divesting businesses.
But the Boeing-McDonnell case breaks with precedent in two ways. First, many of Van Mierts reservations focus at least as much on the companies activities in the
US, and other world markets, as in the EU. It is unclear whether Washington shares his concerns. Second, the Commissions ability to apply pressure to the companies by demanding changes in their EU operations is limited, because these consist of little more than sales and support offices.
The Federal Trade Commission, the US agency examining the merger, has not indicated how or when it will rule. But many US industry observers doubt the agency will raise any serious objections. They expect its verdict by
or before the late July deadline for the European Commissions decision. If the US approves the deal, but the European Commission vetoes it, the stand-off could turn into a political trial of strength. That is the ultimate nightmare scenario, says an EU official.
The impartiality of both anti-trust watchdogs has been questioned by sceptics on the opposite side of the Atlantic. They fear decisions will be more influenced by industrial policy priorities than by competition criteria.
US critics accuse Van Miert of being less concerned with keeping the world market open than with promoting the commercial interests of Airbus. They also suspect his investigation is linked to a recent EU proposal rejected by the US to reopen negotiations on a 1992 bilateral agreement curbing civil aircraft subsidies.
What lies behind the EU proposal is unclear. Some observers in Washington believe it is motivated by demands from Airbus for government funding to help it develop a super-jumbo to compete with Boeings 747. Others think the EU is seeking tighter discipline to prevent Boeing McDonnell using defence contracts to subsidise civil aircraft.
Van Miert has yet to specify formally his objections to the merger, which he is setting out this week in a confidential memorandum to Boeing and McDonnell. Once the companies respond, he will start drawing up his decision.
EU officials say their investigation covers a broad set of issues. They include the commercial power of the merged group, Boeings sales and
purchasing practices and the relationship between the
two companies civil and military businesses.
Van Miert is worried that Boeing-McDonnell, with two thirds of the world market for passenger aircraft and 95 per cent of freight transport sales, could dictate terms to airline customers and blunt competition from Airbus.
His anxieties appear to mirror those of the Airbus consortium. Jean Pierson, its head, warned the FTC this month that the merger could give Boeing-McDonnell a structural hold on the industry, spanning the supply of aircraft, servicing, spare parts and even air traffic control systems.
Van Miert has raised two other objections, also shared by Airbus. One is that Boeings policy of negotiating 20-year solesupplier contracts with airlines is anti-competitive. He has said these arrangements, concluded so far with American Airlines and Delta of the US, would make the merger difficult to approve.
He also argues that Boeing and McDonnell together account for 84 per cent of passenger aircraft in service worldwide, and is worried that airlines would be dependent on the merged group for servicing and spare parts.
Yet Van Mierts strictures about producer dominance in aerospace sit oddly with his enthusiasm for the 1994 merger of the landing gear businesses of TI of Britain and Snecma of France. He blessed that merger, with Airbuss approval, even though it made the group
the consortiums exclusive supplier. He even praised the deal
as a reinforcement of the competitiveness of the European industry.
What weight Van Miert is giving to the airlines views is not known. His best hope for scoring a victory appears to lie in
getting Boeing and McDonnell to modify the deal, or in convincing US authorities to take a tough line towards it. It may
not be clear for several more weeks whether either option is likely to succeed.
Some competition policy experts believe high-level political negotiations with the US may be needed to avert a confrontation. There are suggestions that the issue may be raised by Clinton and Jacques Santer, the Commission president, when they meet in The Hague.
But whether a compromise could be worked out, and what shape it might take, is highly uncertain. Just where this affair will end up is impossible to say, says an EU official. The outlook is very murky.
Guy de Jonquieres
