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Boeing lower on EU probe
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November 27, 1998: 1:27 p.m. ET
Shares of aircraft giant slide 3% on inquiry about price-fixing with Airbus
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NEW YORK (CNNfn) - Shares of Boeing Corp. slid in heavy trading Friday amid reports that European regulators are probing whether the company and Airbus Industrie, the world's only manufacturers of big commercial aircraft, may have colluded in setting prices.
The probe parallels a similar one being conducted by the Federal Trade Commission in the United States. It centers on concern that the aircraft giants abandoned their normally adversarial relationship when they raised prices in tandem on their aircraft this summer.
In July, Boeing announced plans for a five percent increase on most of its planes. Airbus, meanwhile, rolled out a 5 percent blanket price hike at an air show in the United Kingdom in early September. Boeing officially launched its own increases at the same show, held in Farnborough.
Boeing (BA) stock was off 1-7/16, or 3 percent, Friday at 41-5/16 on the New York Stock Exchange on volume of 1.3 shares, making it the biggest loser among the issues in the blue chip Dow Jones Industrial Average.
Following the price increases, EU regulators, led by antitrust chief Karel Van Miert, submitted a series of written questions to both companies to determine whether they had cooperated in fixing prices.
The EU said it received "substantial responses" from Airbus on Oct. 20. Boeing provided its answers on Nov. 3.
Airbus is owned by a consortium that includes DaimlerChrysler's DASA, raising the question as to whether a probe may also focus on the newly formed auto giant.
Searching for signs of collusion
A spokesman for the EU's European Commission said Friday regulators continue to scrutinize the price increases for signs of collusion, an apparent sign that significant questions remain to be resolved.
"The commission is investigating what is behind the statements at Farnborough fair when they simultaneously announced price rises," commission spokesman Stefan Rating said in a conference call with reporters.
On Thursday, the British newspaper Financial Times said the U.S. FTC was investigating Boeing's and Airbus's price hikes for signs of antitrust violations. Rating said Friday the commission was aware of the FTC action; he added the commission had not received any customer complaints.
An Airbus spokesman at the company's headquarters in Toulouse, France, defended the price moves as a natural yearly occurrence that had nothing to do with collusion.
"There has been no collusion at all on pricing with Boeing or anyone else," the spokesman said. "We know this would be illegal and wouldn't do it. The prices we have announced have been annual increases."
Boeing officials could not immediately be reached for comment Friday.
Rating said Friday collusion would have occurred if it is found that the aircraft makers had consulted on or agreed to fix increases in the companies' "catalog" prices. Under European regulatory law, the EU can fine companies as much as 10 percent of their annual sales if price-fixing is determined to have taken place.
EU regulators were quick to emphasize that the mere fact the price increases went into effect simultaneously does not amount to evidence of collusion. The burden of proof is on the EU to prove, by furnishing documentation, that the companies colluded.
For Boeing, the price probe is just the latest in a series of travails to beset the world's largest aircraft maker in recent months. Earlier this year, Boeing announced massive layoffs as part of a streamlining that followed its July 1997 acquisition of McDonnell Douglas Corp.
The merger sparked fears in some regulatory quarters that Boeing would become less competitive in the wake of the merger.
The aircraft maker has also suffered production bottlenecks and slumping orders due to the Asian crisis, though the company affirms that orders from North America and Europe have helped pick up the slack.
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