Prosecutor’s Office Demands New CADE Audit of Boeing’s Purchase of Embraer

RIO DE JANEIRO, BRAZIL – The purchase of Embraer by Boeing may be subject to a new review by Brazil’s antitrust agency, commonly known as CADE (Administrative Council for Economic Defense). The Federal Prosecutor’s Office (MPF) has called for a new review of the agreement approved in January by CADE’s General Superintendency.

At the time, the antitrust agency considered that the companies do not compete in the same market and, therefore, the agreement would not lead to competition issues. The review considered two transactions: the purchase of 80 percent of Embraer’s commercial aviation business by Boeing and the establishment of a joint venture between the two companies to produce the KC-390 military aircraft.

A deputy prosecutor general, Samantha Dobrowolski, the MPF’s representative at the competition agency, argued that the review incorrectly focused on the market for commercial aircraft with 100 to 200 seats, with a specific cut-off of 100 to 150 seats.

The prosecutor believes that there was a shortcoming in the review, as it failed to consider the effects of the merger on the regional aviation market, where aircraft have fewer than 100 seats.

“Although the aircraft identified as potential competitors between Boeing and Embraer are placed in the segment between 100 and 150 seats, the provision described is relevant for the full portfolio performance review, since Embraer currently manufactures several types of aircraft used for regional aviation, and has, in fact, a significant level of success in this market”.

The MPF’s petition will be delivered to a counselor, who will submit his opinion to the CADE Court. Should the tribunal approve this demand, the agreement will again be reviewed and taken to judgment. Embraer and Boeing may continue the operation, but it cannot be finalized until CADE’s decision is reached.

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