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Boeing, Airbus Targets of U.S., EU Price-Fixing Probe

November 27, 1998| From Bloomberg News

TOULOUSE, France — U.S. and European Union regulators are investigating whether Boeing Co. and Airbus Industrie may have illegally fixed prices, EU antitrust officials said Thursday.

The European Commission said its investigation is being conducted separately from that of the Federal Trade Commission, although both organizations have similar concerns. The FTC, which enforces antitrust and consumer protection laws in the U.S., and the European Commission, the EU's executive agency, can fine any companies found guilty of operating cartels.

The Financial Times reported that the FTC opened an inquiry after the plane makers raised prices this year. U.S. authorities were concerned about separate interviews with the paper in which Boeing and Airbus executives said they would no longer compete on price, the report said, citing unnamed sources.

"We are aware of the investigation," said an Airbus spokeswoman who asked not to be named. Seattle-based Boeing declined to comment on the report, referring all questions to the FTC. FTC officials could not be reached.

The world's two biggest plane makers recently indicated that they want to focus on boosting profit, rather than market share, after a bruising price war. The price of commercial jets has dropped 20% in two years, squeezing margins to about 3%. Airbus, a consortium composed of several European aerospace firms, denied any collusion with Boeing.

"The real question is can [regulators] prove anything?" said Zafar Kahn, analyst at SG Securities in London. "That's the difficulty."

The commission said its suspicions were aroused by comments at an air show in Farnborough, Britain, in September. Executives from the companies talked about raising prices in separate meetings with journalists.

EU regulators sent the firms "a series of questions," said European Competition Commissioner Karel Van Miert. "We have received substantial responses and are now evaluating them."

The squeeze on profit has shown in Boeing stock, off 13% this year after Boeing posted its first annual loss in 50 years in 1997. Airbus profit shrank 61% to $147 million.

The U.S. company raised list prices on its aircraft by 5% on July 21, its first increase in 23 years. Airbus followed suit in September, announcing a 3% increase in prices.

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