The European Commission (EC) will investigate whether the joint venture between Boeing and Embraer could reduce competition in the commercial aerospace business.

The commission—the executive branch of the European Union—announced its probe had moved into a formal investigation Oct. 4, stating that the removal of Embraer as the third largest global competitor in the commercial aircraft market could lead to “higher prices and less choice” for customers.

Boeing and Embraer have already responded to the investigation, telling the markets it now expects the transaction to close in early 2020.

The deal had originally expected to close by the end of 2019.

“Markets for commercial aircraft need to function well to deliver innovative and efficient products to customers at a fair price,” said Margrethe Vestager, the commissioner in charge of competition policy.

“We want to make sure that mergers in commercial aircraft do not significantly reduce effective competition on prices and product development,” she said.

The new company, Boeing Brasil-Commercial, in which Boeing will hold an 80% share, with Embraer holding the remainder, will take on Embraer’s commercial aircraft business, as well as product development, production, marketing and services. A second joint venture, EB Defense, LLC, with Embraer at the helm, will market the new KC-390 military airlifter.

The EC said that new potential entrants to the market—such as those from China, Japan and Russia—already face high barriers to entry and are unlikely to be a position to exert the market pressure and competitive constraint such as those currently provided by Embraer for another 5-10 years.

The commission notes that even though Embraer has a comparatively small market share in the 100-150 seat single-aisle commercial aircraft market, it brings a “small but important competitive force” to the market.

The commission is expected to make a decision by Feb. 20, 2020.

Tony Osborne –