The Boing and Mcdonnell Douglas Merger Case Study

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Case Study: Boeing versus Airbus: Two Decades of Trade Disputes The Boeing-McDonnell Douglas Merger
As the two largest producers in the commercial aircraft industry, Boeing and Airbus have been in a long rivalry for over two decades. Because of its huge research and development cost and a volatile market demand situation, the large commercial aircraft industry has only a few viable producers that can successfully operate in this industry. At the end of 1996, there were three competitors in the industry – Airbus, Boeing, and McDonnell Douglas (MDC). When Boeing announced in December 1996 the merger between Boeing and McDonnell Douglas, the dispute has again started between Boeing and Airbus. The merger was expected to go under investigations from antitrust authorities as it was bringing two of the three firms in the industry together. In fact, it was not an ordinary antitrust issue. Instead, it became an issue where the antitrust authorities of the US and the EU both fought to protect the interests of their own domestic firms, the Boeing and Airbus Industrie, while appearing to comply with international trade agreements. The merger announcement

By 1996, the US’ Boeing Company was the largest producer of large commercial aircrafts with Airbus second and MDC third in the market . The announced merger would combine the N.1 and N.3 producers in the industry. As it is described in the Federal Trade Commission’s (FTC) regulations on competition, the Bureau would investigate any mergers and acquisitions that are likely to reduce competition and lead to higher prices, lower quality goods or services, or less innovation . Although the market share of commercial airplanes of MDC was only 10 percent and represented only 3 percent of new orders in 1996 , the effect of the merger would be significant both in the US and EU markets. In the investigations of the EC’s Competition Committee, it is stated that European airlines will account for about 30 percent of cumulated...
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