The Commission has published its September 1999 Article 81(3) exemption decision concerning the notification by General Electric Aircraft Engines (GEAE) and Pratt & Whitney (P&W) of three agreements regarding the creation of a joint venture formed by the two companies, the DE-P&W Engine Alliance LLC (the Engine Alliance). The Engine Alliance was formed to develop, manufacture, sell and support a new aircraft engine, known as GP7000 engine (the new engine). The new engine was intended for future, very large commercial aircraft.
The co-operative joint venture was assessed under Article 81 because it predated the amendments to Regulation 4064/89 covering full-function co-operative joint-ventures. First, the Commission considered that, although it may be economically more efficient for the parties to develop the new engine in co-operation, it would be technically and economically feasible for both parties to develop the new engine independently. The creation and functioning of the Engine Alliance was found to appreciably restrict competition for the new engine, since it reduces the choice of suppliers from the three potential suppliers (GEAE, P&W and Rolls Royce) to two (the Engine Alliance and Rolls Royce).
Next, the Commission considered that the effects of the Engine Alliance will mainly be felt in the Asia-Pacific region, because potential customers for the new engine are primarily airlines with extensive networks operating on long distance flights. However, Jet aircrafts are bought and used by airlines throughout the EEA and by airlines outside the EEA, carrying passengers between EEA countries. The potential customers of the new engines therefore include airlines based in the EEA as well as one of the airframe manufacturers, Airbus, which is based in France. The creation of the Engine Alliance was therefore considered appreciably to affect trade between Member States.
Finally, the four conditions for an Article 81(3) exemption were considered to be met for the following reasons: (1) The co-operation allows the parties to develop an engine that is less expensive in maintenance and cost and therefore contributes to technical and economic progress. (2) The new engine will offer both airframe manufacturers and airlines a technically advanced regime. It may also offer other benefits since it will reduce operating costs, service longer routes on a non-stop basis, and meet new airport noise restrictions. It was therefore considered to benefit consumers. (3) As regards the indispensability of the operation, the Commission considered that, while the parties could develop the new engine independently, that could not be achieved within the same time frame and at the same cost as the Engine Alliance. The co-operation was therefore held necessary in order to have a competing engine on the market at an earlier stage than would otherwise be possible; (4) Finally, the operation was not considered to eliminate competition. Competitive pressure in relation to the new engine will exist, coming from Rolls Royce. The co-operation between the parties will therefore not eliminate competition for the supply of the new engine.
The exemption decision was subject to the following conditions:
(1) The scope of the Engine Alliance has to be limited to the design, development, marketing, sales, support and service of the notified new aircraft engine and its derivatives.
(2) The application of this engine and its derivatives is limited to the particular type of aircraft envisaged by the parties, as well as to any future four-engine aircraft of Boeing designed for more than 450 passengers.
(3) The joint development is limited to development necessary for module integration and the application of the engine to the airframe.
In addition, the decision was subject to the following obligations:
(1) The parties have to notify the Commission of any proposed change in the scope of the Engine Alliance as soon as possible and in any case before implementation thereof.
(2) The Engine Alliance must be kept as a separate legal entity with separate accounting systems from P&W and from GEAE.
(3) Other obligations concerned the role of the parties’ sales and marketing personnel, the treatment of customer requests for multiple engines, as well as safeguards to prevent the exchange of competitively sensitive, non-public information. (OJ L58, 03/03/00).
