EU edges closer to banning Boeing McDonnell union

Antitrust experts from across the European Union yesterday unanimously advised the European Commission to ban the $14 billion (£9.3billion) merger between Boeing and McDonnell Douglas, setting the stage for a transatlantic row. Their call was echoed by political leaders in Germany and France, with French President Chirac saying the merger could be "dangerous" for European industry.

EU sources said they were no longer expecting an 11th hour compromise prior to the Commission's next weekly meeting on July 23rd when it is due to take a final decision on the deal which would create the world's dominant aerospace and defence company.

"The advisory committee agreed with the Commission that the commitments offered by the parties to date are not sufficient to remedy the competition problems," a EU source said following a day-long meeting of the antitrust experts.

The German Economics Minister, Mr Guenter Rexrodt, also threw his support behind the Commission.

Aerospatiale of France, which is state-controlled, and DaimlerBenz Aerospace are the two main partners in Airbus, Boeing's archrival.

Airbus has said the merger is part of a deliberate strategy, with the complicity of the US administration, to eliminate it altogether.

Despite the strong EU stance, yesterday appeared to stick to its guns by refusing to make any further concessions.

"We have negotiated in good faith. We have taken very seriously each of the Commission's concerns and have made a sincere effort to put forward substantial remedies in each of the areas," according to Boeing's vice-president for European affairs, Mr Jim Frank.

Industry representatives and lawyers well versed in EU competition law have been sceptical of the likelihood of a ban. Boeing shares have been little moved in recent days by the talks and were trading at around $60 after the committee news, up from $58 at Tuesday's closing.

The deal has been cleared without conditions in the United States, but it must also get regulatory approval in the EU because of the amount of business Boeing does in the community.

Were Boeing to ignore a ruling against it, the Commission could fine it up to 10 per cent of its turnover and fine any European companies doing business with the US group.

Commission sources said the EU could also seize any new planes being delivered in Europe. The current stalemate between the EU and Boeing raises the spectre of a bitter transatlantic dispute.

The US Vice President, Mr Al Gore, warned recently that the Clinton administration would take any appropriate action to prevent the Commission from torpedoing the merger.

Mr Rexrodt said Boeing had not fully addressed the EU's key competition concerns regarding exclusive supply pacts signed with large US airlines and the danger of "spill-over" of military funds and technology into civilian areas.

European Competition Commissioner Mr Karel Van Miert has sharply criticised the merger ever since it was announced in December. He says the long-term supply contracts signed with AMR Corp's American Airlines, Continental Airlines and Delta Air Lines are unacceptable.

Boeing offered not to sign any new exclusive aircraft supply deals for 10 years, and to scale back existing exclusive contracts to 15 years from 25, Mr Rexrodt said. He also said Boeing promised to report regularly to the EU on any cross-subsidies from McDonnell Douglas' military business to its own civilian operations.

Rexrodt added this and other commitments were not enough to win EU approval. EU sources said Boeing had addressed only one EU competition concern involving intellectual property rights.