## Facts

- In the 1990s, the worldwide market for large commercial aircraft was supplied mainly by three manufacturers: The Boeing Company (Boeing), Airbus, and McDonnell Douglas Corporation (MDC).
- Over the 1980s and 1990s, Boeing’s market share grew to more than 60%, MDC’s share steadily declined, and Airbus’s share was comparatively stable.
- Boeing also had a large installed base because, over the prior three decades, it had built more large commercial aircraft than the other manufacturers combined, giving Boeing strong relationships with airline customers.
- Between 1996 and 1997, Boeing entered long-term exclusive-dealing arrangements with American Airlines, Delta Air Lines, and Continental Airlines, under which each airline agreed to purchase new large commercial aircraft exclusively from Boeing for up to 20 years.
- In December 1996, Boeing and MDC entered a merger agreement under which Boeing would acquire sole control of MDC, making MDC a wholly owned subsidiary.
- The European Commission received notification of the proposed concentration on February 18, 1997 under Council Regulation (EEC) No. 4064/89 (the EU Merger Regulation).
- The Commission continued the suspension of the transaction during its review and opened proceedings under Article 6(1)(c) after identifying serious doubts as to compatibility with the common market.
- The Commission assessed the competitive effects of the concentration in light of (i) the already concentrated market structure and high barriers to entry, (ii) Boeing’s size and installed base, (iii) MDC’s weakening position as a supplier of large commercial aircraft, and (iv) Boeing’s long-term exclusive airline agreements that could restrict rivals’ access to key customers.
- Boeing offered commitments aimed at resolving the Commission’s concerns, including commitments addressing exclusive-dealing arrangements and certain conduct related to Boeing’s broader activities.

## Issues

1. Whether Boeing’s acquisition of sole control of MDC would create or strengthen a dominant position in the relevant market(s) within the meaning of the EU Merger Regulation, thereby rendering the concentration incompatible with the common market.
2. Whether MDC, despite its declining sales, still provided a competitive constraint such that its absorption into Boeing could materially worsen competition in large commercial aircraft.
3. Whether Boeing’s long-term exclusive-dealing agreements with major airlines, considered together with the merger and market structure, could foreclose rival aircraft manufacturers from key demand and contribute to the creation or strengthening of dominance.
4. Whether the commitments offered by Boeing were sufficient to remove the Commission’s serious doubts and permit clearance subject to conditions and obligations under Article 8(2).

## Decision

- The Commission found the transaction constituted a concentration within the scope of the EU Merger Regulation and conducted an in-depth investigation after opening proceedings under Article 6(1)(c).
- The Commission concluded that MDC’s competitive position in large commercial aircraft had weakened significantly, limiting the incremental competitive constraint it would have provided absent the merger.
- The Commission identified significant competition concerns linked to Boeing’s long-term exclusive-dealing arrangements with major airlines, particularly given the limited number of large purchasers and the concentrated structure of the large commercial aircraft market.
- The Commission cleared the concentration as compatible with the common market and the EEA Agreement under Article 8(2), subject to conditions and obligations reflecting Boeing’s commitments.
- The commitments included measures to address the foreclosure risk associated with long-term airline exclusivity and to address related conduct concerns identified during the investigation.

## Legal Principles

- Under Council Regulation (EEC) No. 4064/89, a concentration may be declared incompatible if it creates or strengthens a dominant position that would significantly impede effective competition in the common market or a substantial part of it.
- In assessing dominance, the Commission may consider market structure, barriers to entry, the installed base and customer relationships, and the ability of rivals to win sales from key customers.
- The Commission may take account of contractual arrangements that are closely connected to the transaction or that materially affect post-merger competitive conditions, including long-term exclusive purchasing obligations with major customers.
- In highly concentrated markets with few major buyers, long-term exclusive dealing can restrict access to demand and can contribute to dominance by limiting rivals’ ability to obtain reference customers and sufficient sales opportunities.
- The Commission may accept commitments and clear a concentration under Article 8(2) where the commitments eliminate identified competition concerns; clearance can be made conditional on compliance with those commitments.

## Conclusion

The Commission cleared Boeing’s acquisition of MDC because MDC’s declining position reduced the merger’s horizontal impact, but it required binding commitments to address the risk that Boeing’s long-term exclusive airline agreements and related conduct could restrict rivals’ access to key customers and contribute to dominance in the large commercial aircraft market.


Commission of the European Communities Decision (Boeing/McDonnell Douglas), Case No. IV/M.877 (1997)