European Union Competition Law in The Airline Industry (Aviation Law and Policy) (Aviation Law and Policy Series) (John Milligan)
European Union Competition Law in The Airline Industry (Aviation Law and Policy) (Aviation Law and Policy Series) (John Milligan)
European Union Competition Law in The Airline Industry (Aviation Law and Policy) (Aviation Law and Policy Series) (John Milligan)
Industry
Aerospace Law and Policy Series
VOLUME 14
Editors
Pablo Mendes de Leon, Professor of Air and Space Law, and Tanja Masson-
Zwaan, Assistant Professor of Space Law, Leiden University, The
Netherlands.
Introduction
The Aerospace Law and Policy Series critically examines the fundamental
changes that international aviation and space activities have undergone
since the last century, growing up as mature industries while freeing
themselves from traditional regulatory constraints and displaying a variety
of innovative applications that call for creative legal solutions.
Objective
John Milligan
Published by:
Kluwer Law International B.V.
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2400 AH Alphen aan den Rijn
The Netherlands
Website: www.wolterskluwerlr.com
ISBN 978-90-411-6618-0
Permission to use this content must be obtained from the copyright owner. Please apply to:
Permissions Department, Wolters Kluwer Legal & Regulatory U.S., 76 Ninth Avenue, 7th Floor,
New York, NY 10011-5201, USA. Website: www.wolterskluwerlr.com
Introduction
CHAPTER 1
CHAPTER 2
CHAPTER 3
Market Definition
3.1 Overview
3.2 Role of Market Definition in Competition Law
3.2.1 Article 101 TFEU Cases: Agreements
3.2.2 Article 102 TFEU Cases: Abuse of a Dominant Position
3.2.3 Mergers
3.3 Commission Notice on Market Definition
3.4 ‘Product’ and ‘Geographic’ Markets
3.5 ‘Demand-Side’ Substitutability
3.6 SSNIP/Hypothetical Monopolist Test
3.7 ‘Supply-Side’ Substitutability
3.8 Commission Approach in Practice When Defining the Market
CHAPTER 4
CHAPTER 5
CHAPTER 6
CHAPTER 7
Article 102: TFEU Abuse of a Dominant Position
7.1 Overview
7.2 Dominant Position
7.2.1 Definition
7.2.2 Assessment of Dominance
7.2.3 Relevant Market: Calculation of Market Share
7.3 Substantial Part of the Internal Market
7.4 Abuse
7.4.1 Definition
7.4.2 Rebates, Exclusivity Obligations, ‘English Clauses’
7.4.2.1 Investigations of Other Carriers: Rebates
Principles
7.4.2.2 ‘English Clauses’
7.4.3 Predatory Pricing and Similar Practices
7.4.3.1 Predation Generally
7.4.3.2 Predation in the Air Transport Sector
7.4.4 Refusal to Supply/Deal
7.4.4.1 Refusal to Interline
7.4.4.2 Computer Reservation Systems Denial of Access,
Discrimination
7.4.5 Airports, Access, Discrimination, and Article 106 TFEU
7.4.5.1 Access to Airports
7.4.5.2 Discrimination in Landing Charges
7.4.5.3 Denial of Access to Groundhandling
7.4.5.4 Access to Slots: EU Regulation on Slots at
Airports
7.4.5.5 Discriminatory Charges
7.4.5.6 Discrimination in Quality of Service
7.4.5.7 Poor Quality Service
7.4.6 Excessive Pricing
CHAPTER 8
CHAPTER 9
CHAPTER 10
Annexes
ANNEX I
The European Union (EU) competition rules apply to all practices in the air
transport sector – cartels, information exchange between competitors,
commercial agreements between airlines such as code-sharing, alliances,
joint ventures, vertical agreements with manufacturers, other suppliers or
agents and other means of distribution such as computer reservation
systems, abusive conduct by dominant companies whether airports, airlines
or other companies, and mergers. They also apply to State action such as
the grant of exclusive rights to entities to operate airports or to airlines to
operate routes and State aid.
Since the EU liberalisation of air transport which took place in the
late 1980s, competition has intensified and the industry has evolved, with
the emergence of low cost carriers, global airline alliances oneworld,
SkyTeam and Star Alliance, and greater consolidation between airlines
through mergers and alliances.
The enforcement of competition law in the air transport sector, which
was far behind other industry sectors until 2004, has similarly increased,
both within the EU – at EU and EU Member State level – and
internationally, with inter-jurisdictional cooperation in the framework of the
International Competition Network and bilateral Treaties between the EU
and third countries, such as the United States and Canada. The
investigations of air cargo surcharges and transatlantic mergers and
alliances are examples of such cooperation. Private enforcement is also
increasing with entities bringing legal proceedings in national courts based
on alleged infringements of competition law, in the form of either ‘stand-
alone actions’ or ‘follow on’ claims based on decisions of the Commission
or national competition authorities. Competition law may also be raised as a
defence to other claims.
Competition law is relevant when it comes to drafting commercial
agreements, planning and structuring joint ventures and mergers, informal
collaboration with competitors and unilateral conduct of dominant
companies. This book sets out the law and principles of competition
assessment of such practices. While it aims so far as possible to be a stand-
alone text minimising the need for cross-referencing, it does not pretend to
be a detailed text on all issues relating to competition law and readers are
recommended to refer to the European Commission website (DGCOMP)
and current editions of leading competition texts such as Bellamy & Child,
Van Bael & Bellis and Whish & Bailey (also discusses United Kingdom
(UK) law). Other books, articles or sources are cited in the text.
Chapter 1 deals with the fundamentals of the EU, its laws and
institutions, and so as not to ignore the UK position vis-à-vis the rest of
Europe following its referendum of 23 June 2016 on EU membership,
includes a Note on ‘Brexit’. Chapter 2 traces the development of
competition regulation of the air transport industry, including the factual
and political context and the eventual advent of competition law in the
sector, with discussion of cases such as Nouvelles Frontières, Ahmed Saeed
and ‘Open Skies’, air transport block exemptions, the last of which (tariff
consultations) expired in 2007, through to the current legal framework and
the influence of the above on the industry structure. Chapter 3 sets out the
principles of market definition, the basis for all competition assessment.
Chapter 4 discusses the key concepts and principles of Article
101 of the Treaty on the Functioning of the European Union (TFEU) which
regulates anticompetitive agreements and practices, Chapter 5 discussing
‘horizontal’ agreements with focus on cartels and code-sharing, Chapter 6
discussing ‘vertical agreements’. Chapter 7 discusses abuse of a dominant
position and the principles of Article
102 TFEU. Chapter 8 discusses mergers and alliances, including a section
on market definition in the case of agreements between airlines. Chapter 9
discusses the enforcement of competition law, public and private, including
the recent harmonisation of private actions for damages by the EU Damages
Directive 2014. Finally, Chapter 10 discusses State aid (Articles 107–109
TFEU) and mentions the regulatory position as regards State subsidies by
non-EU countries to airlines. The law is as stated at 1 March 2017 and the
author has endeavoured to include developments to 31 March 2017 to the
extent there have been any.
The author is grateful to John Balfour, Consultant at Clyde & Co, and
the editor, Pablo Mendes de Leon, for their comments on the text.
The author welcomes comments on the text and can be contacted at:
john.milligan@clydeco.com
CHAPTER 1
Introduction to the European Union and Competition
Law
1.1 OVERVIEW
The EU is a customs union and free trade area of 28 Member States, with
its own legal system and institutions responsible for law-making, enforcing
laws and judicial protection. Primary legislation is contained in the Treaty
on the Functioning of the European Union (TFEU), with secondary
legislation in the form of Regulations, Directives, and Decisions addressed
to Member States. A fundamental part of the EU is the creation of a system
of undistorted competition. This comprises the prohibition of agreements
which restrict or distort competition, abuse of a dominant position, control
of mergers which significantly impede competition in particular by
strengthening a dominant position and the prohibition of State aids by
governments which favour undertakings and distort competition.
In order to leave the EU, a Member State has to notify the European
Council of its intention to do so, under Article 50 of the Treaty on European
Union (TEU set out in Appendix III – Treaty on European Union
Provisions). The UK made this notification on 29 March 2017. Formal
negotiations on leaving the EU then commence, and the exiting Member
State (UK) has a maximum of two years from the date of notification in
which to conclude an agreement on its withdrawal from the EU. Any exit
deal has to be approved unanimously by the Council, and the European
Parliament has veto powers over any deal struck. In the absence of an
agreement on withdrawal being reached, unless the Council unanimously
agreed that the two-year period could be extended, or the Article 50
notification could be revoked, the EU Treaties and legislation would cease
to apply to the UK two years from the date Article 50 was triggered (29
March 2019). In that scenario, the UK’s relationship with the EU would
then, as other non-EU countries, be governed by World Trade Organisation
(WTO) rules.
1.4 INSTITUTIONS
The Commission is the EU’s politically independent executive arm. Its role
is to propose legislation, for adoption by the Parliament and the Council, to
adopt measures implementing Council Regulations – in the field of
competition law, block exemption Regulations – and to ensure that EU law
is properly applied in all the member countries, which will include taking
specific enforcement action against undertakings or governments.
The Commission also represents the EU internationally, in particular
in areas of trade policy and negotiating international agreements on behalf
of the EU, in so far as it has competence to do so. Air services agreements
(ASAs) with third countries are an example of the Commission negotiating
on Member States’ behalf in the air transport sector (discussed in Chapter 2
Liberalisation of Air Transport).
The Commission is composed of the College of Commissioners of 28
members, including the President and Vice-Presidents. The Commissioners,
one nominated by the government of each Member State, sit for a five-year
term and are assigned responsibility for specific policy areas by the
President. The Commission is organised into Directorate-Generals which
cover the main areas of the EU’s activity. The Directorate-General for
Competition (DG COMP) is charged with enforcing the competition rules
(discussed in greater detail at Chapter 9 Enforcement of EU Competition
Law).7
Members of the Parliament are elected every five years by voters across the
EU and they sit according to their political allegiance, rather than their
Member State of origin. The Parliament shares power with the Council in
the adoption of legislation in certain defined areas through the ‘co-decision
procedure’. The Parliament has much less influence than the Commission
and the Council in the field of competition law, being involved in
competition legislation only through a more limited ‘consultation’
procedure, although it has called for competition law to be brought within
the co-decision procedure. The Damages Directive was, however, a rare
case of competition law adopted under this procedure.8 The Parliament’s
other main duty is scrutiny of the other EU institutions. This includes the
election of a European Ombudsman, whose remit is to investigate and
report on complaints concerning instances of maladministration in the
activities of the other EU institution or agencies, with the exception of the
Court of Justice acting in its judicial role.9
There was until 1989 only one European Court responsible for the
interpretation and enforcement of EU law. In 1988, the General Court
(initially named the Court of First Instance) was established to assist the
Court of Justice. The Court has one judge from each Member State. It rules
on actions for annulment brought by individuals, companies and, in some
cases, EU governments. Notably in the field of competition law and State
aid, it hears appeals against Commission decisions. Appeals must be
brought within two months of the decision being challenged.10 The Court
can annul or uphold fully or in part, decisions of the Commission and can
cancel, increase or reduce any fine imposed by the Commission. Appeals
are on points of law but, unlike the higher Court of Justice, the General
Court also has exclusive jurisdiction to find and appraise the relevant facts
and to assess the evidence. In competition cases, this will include whether
the conditions for the application of Article 101 or 102 TFEU, prohibiting
anticompetitive agreements and abuse of a dominant position, respectively,
are met. A notable example of a Commission decision being annulled by
the General Court in the field of air transport is its series of judgments of 16
December 2015 annulling the landmark Commission Airfreight decision in
2010, in which carriers worldwide had been fined EUR 799 million.11
The Court of Justice consists of one judge from each Member State and
eight Advocates General. The role of the Advocate General is to provide an
opinion on how he/she believes the case should be resolved, and his/her
Opinion is more often than not followed.
The Court of Justice rules on alleged breaches of the EU Treaties and
any laws made under them by a Member State government, or on failure to
implement EU law or incorrect implementation. The Open Skies judgments
of 2002 against Member States against whom infraction proceedings were
brought by the Commission were a notable example in the field of air
transport (discussed in Chapter 2 Liberalisation of Air Transport). The
Court of Justice also hears both preliminary references from Member
States’ national courts when they refer questions on the interpretation of EU
law, and allegations of a failure to act by an EU institution, body, office or
agency.
The Court of Justice also hears appeals, on points of law only, against
judgments and orders of the General Court.12 In principle, the appeal does
not have suspensive effect. If the appeal is admissible and well founded, the
Court of Justice sets aside the judgment of the General Court. In such a
case, it generally refers the case back to the General Court, which is bound
by the decision given by the Court of Justice on the appeal, and there is no
guarantee that the result on the facts will necessarily, therefore, be different.
If the state of the proceedings so permits, the Court of Justice may itself
give final judgment in the case.
The Court of Justice also gives preliminary rulings on the
interpretation of EU law and the validity of acts of institutions of the EU, at
the request of a Member State court or tribunal, remitting the matter to the
national court to apply the ruling to the facts before it.13 A national court
action in the course of which there is a request for a preliminary ruling can
be a direct means of having the point(s) of law being heard by the Court of
Justice. Rulings on requests for a preliminary reference have been
significant in the development of the application of competition law to the
air transport sector, including judgments such as Nouvelles Frontières and
Ahmed Saeed (discussed in Chapter 2 Liberalisation of Air Transport).
EU law takes precedence over the national laws of the Member States.14
Member States are also under a duty to refrain from any measure which
could jeopardise the attainment of the EU’s objectives.15
The primary source of EU competition law are the Treaty articles,
notably Articles 101–109 TFEU. There is also a large amount of secondary
legislation in particular, Regulations establishing the current competition
regime. Regulations are directly applicable and establish uniform rules
across the EU. Regulations, which shall be discussed include 1/200316
which sets out the provisions implementing Articles 101 and 102, sectoral
block exemptions in the field of air transport (which have now lapsed
although Regulation 487/200917 enables further Regulations to be adopted)
and block exemptions for other types of agreements, notably vertical
agreements covered by Regulation 330/201018 and the EU Merger
Regulation 139/2004.19
Directives are harmonising measures establishing minimum standards
which must be met by Member States, and must be implemented by
Member States in their national laws. Directives are rarely adopted in the
field of competition law.
One of the fundamental principles set out in Article 3(f) of the EEC Treaty
in 1957 was ‘the institution of a system ensuring that competition is not
distorted in the Community’. Article 119 TFEU also provides ‘The
activities of the Member States and the Union shall include, as provided in
the Treaties, the adoption of an economic policy which is based on the close
coordination of Member States’ economic policies, on the internal market
and on the definition of common objectives, and conducted in accordance
with the principle of an open market economy with free competition.’ The
Treaty provisions on competition since the EEC Treaty have remained
virtually unchanged.
The underlying premise of competition law is that in the open market
economy, rules are needed to prevent practices such as price fixing, market
sharing, abuse of a dominant position, anticompetitive mergers, the granting
of unjustified monopoly rights and State aid measures which distort
competition by artificially keeping companies in business.23
All or most of these principles are generally common to antitrust
systems globally. A second objective of EU competition law, distinct from
other systems such as the US, is the integration of national markets into a
single European market without barriers between Member States – a factor
which led to liberalisation and competition rules in the air transport sector
in Europe (see Chapter 2.)
1. There were previously competition provisions of sectoral application in the Treaty
establishing the European Coal and Steel Community 1951 and the Treaty establishing the
European Atomic Energy Community (Euratom) 1957).
2. Winston Churchill, Zurich September 1946; Schuman Plan which led to the Coal and Steel
Community 1951; Spaak Report and intergovernmental conference which led to the creation
of the Treaty of Rome.
3. The Council of Europe created the European Convention for the Protection of Human
Rights and Fundamental Freedoms in 1950.
4. For a discussion of this and other areas of EU law which may be impacted by Brexit,
including access to the single EU air transport market and agreements concluded with third
countries such as the US, market access and Open Skies see: ‘The EU air law consequences
of Brexit for the UK’ 27 June 2016, available on
http://www.clydeco.com/blog/brexit/article/the-eu-air-law-consequences-of-brexit-for-the-
uk.
5. The Commission also legislates, for example ‘block exemptions’, but only on the basis of a
mandate from the Council and EP.
6. See generally TFEU Articles 235–243 on European Council and Council of Ministers.
7. See generally TFEU Articles 244–250.
8. Directive 2014/104/EU of the European Parliament and of the Council on certain rules
governing actions for damages under national law for infringements of the competition law
provisions of the Member States and of the European Union, OJ L 349, 5.12.2014, pp. 1–19.
9. TFEU Article 228; see generally TFEU Articles 223–234.
10. Article 263 TFEU.
11. Cases T-9/11 Air Canada, T-28/11 Koninklijke Luchtvaart Maatschappij, T-36/11 Japan
Airlines, T-38/11 Cathay Pacific Airways, T-39/11 Cargolux Airlines International, T-40/11
Latam Airlines Group and Others, T-43/11 Singapore Airlines and Others, T-46/11 Deutsche
Lufthansa and Others, T-48/11 British Airways, T-56/11 SAS Cargo Group and Others, T-
62/11 Air France-KLM, T-63/11 Société Air France and T-67/11. Martinair Holland v
Commission, as yet unpublished. There were fines in other jurisdictions globally which are
outside the remit of the Commission decision.
12. Article 256(1) TFEU; see also Protocol (No 3) on the Statute of the Court of Justice of the
European Union, Article 58.
13. Article 267 TFEU.
14. Case C-35/76 Simmenthal [1978] ECR 629.
15. Article 4 Treaty on European Union.
16. Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the
rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L1, 4.1.03, p1).
17. Council Regulation (EC) No. 487/2009 of 25 May 2009 on the application of Article 81(3)
of the Treaty to certain categories of agreements and concerted practices in the air transport
sector.
18. Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3)
TFEU to categories of vertical agreements and concerted practices 2010 OJ L 102 page 1.
19. Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations
between undertakings 20 January 2004 (OJ L 24, 29.1.2004, p. 1).
20. Commission decisions, notices and other communications are available on the
Commission’s website at: http://ec.europa.eu/competition/.
21. For further discussion, see textbooks such as The European Union and its Court of Justice
2nd edition by Anthony Arnull 2006; European Union Law of Competition 7th edition by
Bellamy & Child 2013.
22. Article 3(1)(b) TFEU.
23. 30th Report on Competition Policy, European Commission 2000 para. 1.
24. See Commission Regulation 330/2010 on the application of Article 101(3) of the Treaty on
the Functioning of the European Union to categories of vertical agreements and concerted
practices OJ L 102, 23.4.2010, pp. 1–7; Commission Regulation 316/2014 on the
application of Article 101(3) of the Treaty on the Functioning of the European Union to
categories of technology transfer agreements; OJ L 93, 28.03.2014, pp. 17–23 Commission
Regulation 1217/2010 on the application of Article 101(3) of the Treaty on the functioning
of the European Union to categories of research and development agreements OJ L 335,
18.12.2010, p. 36; Commission Regulation 1218/2010 on the application of Article 101(3)
of the Treaty to categories of specialisation agreements OJ L 335, 18.12.2010, p. 43.
25. Regulation 479/2009 nevertheless enables the Commission to adopt block exemptions in
respect of agreements between airlines.
26. Council Regulation 1/2003 of 16 December 2002 on the implementation of the rules on
competition laid down in Articles 81 and 82 of the Treaty OJ L 1, 4.1.2003, p. 1.
27. Joint ventures which are not full-function, such as alliances between airlines involving
extensive integration of networks, will fall outside the scope of the EUMR and may be
subject to Article 101 and/or Article 102 TFEU.
28. Decision of 2 October 1991 Case No. IV/M053 – Aerospatiale-Alenia/de Havilland; see
also Ryanair/Aer Lingus I and III; Aegean Olympic I – Chapter 8 Mergers and Alliances.
CHAPTER 2
Liberalisation of Air Transport
2.1 OVERVIEW
Despite EU competition law being in force from 1958, air transport largely
operated beyond the reach of competition law until the late 1980s. Under
the international system of air transport, regulated by mostly bilateral and
reciprocal agreements between States, the generally incumbent ‘flag
carrier’ airlines benefited from State protection and in many cases
ownership, and market access was denied to potential competitors –
although some countries agreed to more liberal arrangements. From 1987 to
1992 a process of liberalisation of air transport took place whereby
regulatory restrictions on air transport were removed, and legislation
enabled the Commission to apply EU competition law to air transport,
initially only to intra-EU transport and latterly between the EU and third
countries as well, and to grant ‘block exemptions’ for certain categories of
agreements, under which the Commission introduced several exemptions,
which have now expired.
There were ‘transitional’ rules for the application of competition law in the
transport sector but these were limited in scope. Then Articles 88 and 89
EEC (now amended Articles 104 and 105 TFEU – old numbering used in
the following sections of this chapter) set out the powers conferred on
national authorities and the Commission, respectively. National authorities
were obliged to ‘rule upon the admissibility’ of potential infringements
having regard to EU competition law, and the Commission had the power to
investigate infringements in conjunction with Member State authorities and
could ‘propose appropriate measures to bring them to an end’, authorising
Member States to take enforcement measures (if they wished to do so). The
Commission itself had no power to order the termination of an
infringement.
A French Court had been asked to enforce a criminal law to convict travel
agents for not adhering to tariffs approved by the Minister for Civil
Aviation,58 and considering the French law breached Article 101, made a
reference to the Court of Justice for a preliminary ruling. The case attracted
attention from not only the airlines involved (Air France and KLM) and the
French Government who had brought the prosecution, but also the
governments of Italy, the Netherlands and the UK, as well as the European
Commission, who all made submissions to the Court.
The Court held, for the first time, that air transport was indeed subject
to competition law and that if Member States approved tariffs which
breached competition law, this would also breach Article 106 TFEU which
prohibits Member States from adopting, with regard to public undertakings
or undertakings enjoying special or exclusive rights, any measure that
would lead to an infringement of EU law.59 The Court stated that Treaty
provisions could only be excluded from other Treaty provisions by an
express provision of the Treaty and noted that there had been no such
exclusion of transport from the competition rules and that the Treaty rules
on competition therefore applied to air transport.60
In the absence of legislation implementing the competition rules,
however, the Court held that the Commission could not order termination of
infringements, unless there was a prior decision of a national authority
under (then) Article 88, or of the Commission under Article 89. Nor was it
open to a national court to declare an agreement incompatible with Article
101(1)61 because it had no power to make a full assessment under Article
101 given it had no power to grant an exemption under Article 101(3) in
respect of agreements.62
2.5.1 Background
The Commission made liberal use of its power to adopt block exemptions,
adopting Regulations 2671/88 on agreements relating to joint planning and
coordination of capacity, sharing of revenue and consultations on tariffs on
scheduled air services and slot allocation at airports, 2672/88 on CRSs for
air transport services and 2673/88 on ground handling services.86
Commission Regulation 2671/88 was subsequently amended by Regulation
1617/9387 and 2672/88 by 3652/93.88 These block exemptions have now
expired, but are discussed briefly given their relevance to agreements pre-1
May 2004 and as an indication of the Commission’s approach to the
agreements listed.
2.6.3.1 IATA Tariff Consultations
This was permitted in cases where airlines could not reasonably be expected
to operate the route independently, to ensure the maintenance of services to
new or less busy routes, periods or times of the day, and help develop
onward connections.91 Such planning could include connecting flights
between different airlines. Planning and coordination of minimum capacity
to be provided on services the connection of which was coordinated
between airlines could be permitted, provided that it did not limit the
capacity to be provided by participating carriers or lead to them sharing
capacity. The Regulation also permitted carriers to agree schedules and the
minimum capacity to be utilised on such schedules, so as to facilitate
interlining.
This case had arisen from a reference for a preliminary ruling from the
Court of Justice shortly before the Court’s judgment in Nouvelles
Frontières, from a German court where a case had been brought against
travel agents in Germany, including Ahmed Saeed Flugreisen, for selling
tickets from Frankfurt to Tokyo (indirect flights commencing at Lisbon,
Portugal, agents benefitting from and passing on savings from differences
in currency rates) at prices which were lower than the tariff approved by the
German government. The German court questioned whether the provisions
of the German law were contrary to the EU competition rules.
The Court confirmed that the Commission’s powers, as regards EU-
third country services, were the same as those under the ‘transitional
regime’ as discussed in the Nouvelles Frontières case, given that
agreements on tariffs on air transport between EU and non-EU countries
were outside the scope of the Commission’s newly acquired enforcement
powers under Regulation 3785/87. While Article 101 in conjunction with
Article 106 prohibited national authorities from encouraging the conclusion
of agreements on tariffs contrary to Article 101 (or 102 as the case may be),
the Commission had no power to investigate or order the termination of
such infringements, its powers being limited to those set out in then Article
89 (now as amended 105 TFEU).
As regards Article 102, however, the Court held that an agreement
could also be considered an abuse of a dominant position, if one of the
airlines was in a dominant position.100 In such a case, the Court held that
the Commission or national court could indeed take action in respect of
such abuse, despite the absence of legislation implementing Articles 101
and 102 as regards third countries. This was on the basis that there was no
scope for exemption under Article 102, abuse simply being prohibited (see
also discussion of Nouvelles Frontières above). Both national authorities
and the Commission, therefore, had the power to prohibit such abuse.101
Following this case, the Commission sought powers to apply Articles
101 and 102 to EU/non-EU routes. It stated that given it was not
empowered to grant exemption under Article 101(3), there was uncertainty
for airlines and Member States when approving tariffs filed by carriers for
such routes which may otherwise benefit for exemption.102 The
Commission was not granted these powers.
One important reason why powers had not been given to the Commission to
enforce Articles 101 and 102 to EU / non-EU air transport, was due to the
conflict that this would create between competition law and Member States’
ASAs with third countries, which were a matter of Member State
competence, and Member States resisted the expansion of Commission
powers in this area. The restrictive arrangements under bilateral ASAs,
which had been dismantled in respect of intra-EU transport, continued to
apply unchanged, therefore, in respect of EU-third country traffic.
The Commission issued a proposal that it be granted competence to
negotiate and conclude ASAs with third countries and observed that
international air transport was fragmented by bilateral agreements, with
market opportunities very unevenly distributed for EU carriers. It stated;
‘certain third countries are using this to gradually further their own
Interests. In this context the member states have similar interests and must
stand together. The Community must be considered as one market both
internally and externally’.106 No such powers were granted by the Council.
The Open Skies judgments had clarified the question of the respective
competence shared between the Member States and the EU, and resulted in
the Member States in question being obliged to bring their bilateral
agreements into line with EU law. On 5 June 2003, the Council granted the
Commission a mandate to negotiate with the US and with all other third
countries on the revision of nationality clauses.115 Regulation 847/2004
provided a new framework for relations between the EU and third
countries, recognising the competence of Member States to negotiates
ASAs, but providing for coordination between Member States and the
Commission in relation to negotiations with third countries116 so that
existing bilateral agreements between Member States and third countries
that contained nationality clauses should be amended or replaced by new
agreements with EU designation clauses.117 This state of affairs led to the
conclusion of the agreements discussed below.
With the introduction of competition rules and full market access since the
early 1990s, air travel and the number of new entrants have increased and
prices have decreased.127
On one hand, low-cost carriers (LCCs) have emerged as a result of
full access to the EU aviation market, including unrestricted cabotage rights
as of 1 April 1997, being able to establish bases for crew and aircraft
throughout the EU and with online booking facilitating direct sales. The
low-cost model is one of low fares, point-to-point flights, often between
‘secondary’ airports, on short-haul routes to price-sensitive passengers, with
the ability to purchase one-way – as opposed to the more restrictive full
service carrier return tickets where a one-way ticket may be as expensive as
a return. This has been achieved in part by creating new demand by adding
not only new routes, but also at the expense of the full service carriers
operating on parallel routes. The LCCs operate on lower profit margins than
legacy carriers (due to them not generally operating premium class), thus
requiring a high load factor. ‘LCCs’ have grown rapidly and according to
ICAO, Ryanair, easyJet, and other European LCCs had expanded to account
for 37 per cent of the seat capacity on scheduled services in the EU as at
2012.128
On the other hand, and in response to LCC entry, the traditional ‘full
service’ / legacy carriers have used the liberalised market to establish ‘hub-
and-spoke’ systems where the airline selects a ‘hub’ to or from which traffic
would be concentrated for transport from or to another major hub.
Passengers would be transported to or from these hubs from or to secondary
airports (or ‘spokes’). This replaced point-to-point travel enabling more
efficient use of aircraft capacity. There has also been increasing
consolidation of the industry through airline alliances.129
There has also been a blurring of the boundaries between the low-cost
and full service carriers, with each adapting to compete with the other’s
model, and to a lesser degree, between scheduled and non-scheduled
carriers. Certain LCCs have introduced premium categories, as observed by
the Commission in relation to Ryanair in its IAG/Aer Lingus decision
where it noted that a substantial number of business customers increasingly
chose LCCs for their business trip, thus reducing the differences between
network carriers’ traditional focus on business / premium customers and
LCCs’ focus on leisure customers, and that LCCs had developed business
type classes to attract business customers.130 Full service carriers have also
entered the low-cost market, for example Aer Lingus, now merged with
IAG, and Lufthansa, which set up a subsidiary carrier Germanwings to offer
travel on the LCC model.
3.1 OVERVIEW
Defining the ‘relevant market’ is the starting point for assessing the effect
on competition of any agreement, conduct or merger and will often dictate
whether there is a competition infringement or not. According to the
Commission, the exercise of market definition consists in identifying the
effective alternative sources of supply for the customers of the undertakings
involved, both in terms of products or services and the geographic location
of suppliers.131 If there are such alternative sources of supply, they should
be included within the relevant market. The process of defining the market
focuses on the ‘product’ market and ‘geographic’ market, to identify those
actual competitors of the undertaking(s) whose agreement, conduct or
merger is being assessed, that are capable of constraining those
undertakings’ behaviour. This also makes it possible to calculate the market
share which is a first indication of the market power of companies in a
market.
A narrow market definition will result in a higher market share,
whereas wider groups of products or services or geographic areas will result
in lower shares. Given the potentially adverse implications of high market
shares on the competition assessment of agreements, conduct and mergers,
a very significant aspect of competition cases is the determination the
relevant market. It does not necessarily follow that a significant market
share equates to market power, if for example, potential competition – the
ability of potential competitors to enter the market quickly and effectively –
may significantly constrain the behaviour of the company(ies) being
assessed.
3.2.3 Mergers
The primary test for determining what the relevant market should be is
‘demand-side’ substitutability – namely to determine close substitutes
readily available in the geographic area, or another area to which consumers
can turn should prices increase. According to this test, if a customer would
view the two products or services as substitutable and would readily switch
between them following a 5–10 per cent permanent increase (discussed
below at section 3.5 – ‘SSNIP’ test), they would be likely to form part of
the same relevant product market.146 Products having the same
characteristics or responding to the same customer needs are likely to be
regarded as belonging to the same product market. Products which satisfy
different needs will, therefore, belong to distinct markets, except for the
fairly exceptional circumstances where supply-side substitutability may be
relevant (discussed at section 3.6. below).
In the Virgin /British Airways case, BA was found to hold a dominant
position on the UK market for air travel agency services.147 Arguments that
dominance should be assessed by reference to the position that BA held on
particular routes in respect of which sales were made, were rejected, the
General Court holding that agency or distribution services provided in
relation a product or service, were a distinct market from that product or
service itself. Agents were found to constitute independent intermediaries
carrying on an independent business of providing services, collecting the
price of the transport and remitting it to the airlines, and providing those
airlines with advertising and commercial promotion services. The Court
also found that this was an economic activity for which, at the time of the
contested decision, airlines could not substitute another form of distribution
of their tickets, and that they therefore constituted a market for services
which was distinct from the air transport market.148 The relevant
geographic market was found to be the UK, on the basis that travel agents
tended to operate within national boundaries, and customers normally
booked tickets in their country of residence. The boundaries of travel
agency markets may have become more blurred given the increase in sales
through online travel agents.
In the case of scheduled passenger air transport services, demand-side
substitutability has been the principal means of defining the market, with
focus on the origination and destination (O&D) approach whereby
passengers consider all alternatives of travelling from a city of origin to a
city of destination. The specific aspects of this approach are discussed in
Chapter 8 Mergers and Alliances, section 8.4.1.
The Commission will have regard to case law of the Court of Justice and its
own experience. The approach of the Commission (as well as national
regulators) will be to invite the parties to submit their own definitions of the
‘relevant market(s)’ and will seek detailed information in this regard. Given
that market definition is based on the business realities in each case, it will
also be a factual and empirical exercise, such as, in the case of air transport,
numbers or types of passengers conveyed. The Commission or other
regulator will rely on a variety of evidence when it comes to defining
markets, and it will require sales data and other trade statistics, evidence of
customers’ purchasing patterns in particular recent past events such as
customers switching to alternative products or services (product market), or
diverting orders to other areas (geographic market) particularly where there
have been changes in prices, or where new products or services have been
launched. Quantitative tests (including with recourse to economists) will be
applied to analyse such events or evidence submitted by the parties on
whether, for examples, price increases would result in loss of customers in
sufficient numbers such as to render them unprofitable.155 The Commission
will also ‘market test’ the parties’ views by inviting views of customers and
competitors, which views will carry greater weight if supported by
evidence. The Commission will also rely on customer surveys, and this will
often be the case with air transport cases.156
Barriers or costs if any associated with switching to alternative
products or services would also be relevant.157 As discussed above,
substitute products or services would tend to be excluded if customers had
to incur capital investment or other costs to switch to alternatives.
Regulatory and other requirements, such as adherence to particular
standards, access to distribution, or need for a physical presence, will also
be taken into account.158 In many areas of economic activity including air
transport, previously national markets have become EU wide as a result of
EU liberalisation, though regulatory barriers on a non-EU level may remain
(discussed in Chapter 2 Liberalisation of Air Transport). Consumer or
national preferences, if any, such as allegiance to a national carrier, will be
taken into account. The extent to which the party(ies) take into account
other products or services in their own price setting, for example,
monitoring competitor products or services, will also be relevant. Temporal
markets to the extent they exist, such as in the case of scheduled air
transport services, peak and off- peak services, and distinctions based on
distinct categories of customers such as time / non-time-sensitive
passengers, may also be relevant (see Chapter 8 Mergers and Alliances).
In cases where it is not necessary to define markets due to
competition issues not arising on alternative definitions applied, the
Commission will leave market definition open.
131. Commission’s Notice on the Definition of the Relevant Market for the purposes of
Community law 1997 OJ C 372/3, para. 13.
132. Notice on agreements of minor importance which do not appreciably restrict competition
under Article 101(1) of the Treaty on the Functioning of the European Union (‘De Minimis
Notice’) (2014/C 291/01).
133. Communication from the Commission — Guidelines on the applicability of Article 101 of
the Treaty on the Functioning of the European Union to horizontal cooperation agreements
OJ C 11, 14.1.2011, pp. 1–72.
134. Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3) of
the Treaty on the Functioning of the European Union to categories of vertical agreements
and concerted practices. Other block exemptions include Commission Regulation
1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the
Functioning of the European Union to certain categories of research and development
agreements.
135. see Case T-62/98 Volkswagen AG v Commission [2000] ECR II-2707 at paras 230–232.
136. Case C-226/11 Expedia Inc. v Autorité de la concurrence and others, 13 December 2012.
137. Case C-67/13 P, Groupement des Cartes Bancaires 11 September 2014, para. 58. Revised
version of 03/06/2015 Guidance on restrictions of competition “by object” for the purpose
of defining which agreements may benefit from the De Minimis Notice, accompanying the
Commission Notice on agreements of minor importance which do not appreciably restrict
competition under Article 101(1) of the Treaty on the Functioning of the European Union
(De Minimis Notice). See also Chapter 4 Elements of Article 101 TFEU, section 4.5.
138. Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations
between undertakings 20 January 2004 (OJ L 24, 29.1.2004, p. 1.
139. Recital 32 of the Merger Regulation; Guidelines on the assessment of horizontal mergers
under the Council Regulation on the control of concentrations between undertakings OJ C
31, 5 February 2004 p5.
140. Commission’s Notice on the Definition of the Relevant Market for the purposes of
Community law 1997 OJ C 372/3.
141. According to the Commission, the focus of assessment in State aid cases is the aid recipient
and the industry/sector concerned rather than identification of competitive constraints faced
by the aid recipient, but the principles of market definition may serve as a basis of
assessment of State aid cases where issues of market power and therefore of the relevant
market are raised (Notice on definition of the relevant market, page 1 footnote 1).
142. Notice on the definition of the relevant market, para. 7.
143. Ibid para. 8.
144. According to the Commission, in the two years 2013–2015 its merger decisions found the
geographic market to be the EEA or wider in 61 per cent of cases, compared to 48 per cent
10 years previously. See Competition Policy Brief 2015-12 March 2015.
145. COMP/M.6554 – EADS/STA/Elbe Flugzeugwerke JV, decision of 3/09/2012;
COMP/M.6844 – GE/Avio, decision of 1/7/2013 and COMP/M.6410 – UTC/Goodrich,
decision of 26/7/2012.
146. Notice on the definition of the market para. 15.
147. Commission Decision 2000/74/EC of 14 July 1999 relating to a proceeding under Article
102 of the EC Treaty (IV/D-2/34.780 — Virgin/British Airways) (OJ 2000 L 30, p. 1, para.
72).
148. Case T-219/99, British Airways plc v Commission [2003] ECR II 5917 para. 100; upheld by
ECJ Case C-95/04 P, British Airways v Commission [2007] ECR I-2331.
149. Notice paras 15–19.
150. Notice para. 29.
151. Notice paras 20, 23.
152. Case 6/72 Europemballage v Commission (Continental Can) [1973] ECR 215 para. 33.
153. Aerospatiale-Alenia/de Havilland Case IV/M. 053, para. 14.
154. Ibid. Arguments on supply-side substitutability as regards ‘network markets’ have been
made by airlines in relation passenger services discussed at Chapter 8.
155. In KLM/Martinair M.5141, the Commission scrutinised such ‘critical loss’ analysis on
likely loss of passengers from the parties para. 295 et seq.
156. In KLM/Martinair M.5141, the Commission’s in-depth investigation included a consumer
survey carried out at Schiphol Airport (Amsterdam) which indicated that a significant
proportion of passengers would either not travel at all or travel elsewhere if there were a
sustained price increase for flights to Aruba or Curacao, thus limiting the potential for price
increases.
157. Alpha Flight Services/Aéroports de Paris OJ 1998 L230/10 – if customers would incur
material costs or only switch in the longer term that would not suffice to warrant inclusion
in the relevant market.
158. Notice on market definition paras 30, 55.
CHAPTER 4
Elements of Article 101 TFEU
4.1 OVERVIEW
Agreements or concerted practices between undertakings which have as
their object or effect the prevention, restriction or distortion of competition
are contrary to Article 101(1) TFEU. The list of examples in Article 101(1)
(a)–(e) is illustrative only. The key elements of Article 101(1) are discussed
below. Agreements caught by Article 101(1) are void and unenforceable
under Article 101(2) unless they satisfy the criteria for exemption under
Article 101(3). It is the effect of agreements rather than their form which
determines whether they will be caught by Article 101(1), and particular
forms or wording of an agreement which are permitted if concluded
between given parties in a given economic context, may not necessarily be
permitted between different parties, or in a different economic context.
4.2 UNDERTAKINGS
4.3.1 Agreement
4.3.1.1 Definition
Agreements take many forms. Within the air transport sector, resolutions
adopted by IATA, have been considered to be agreements between
undertakings, namely between the IATA member airlines.171 ‘Agreement’ is
broadly defined, it being sufficient for the purposes of Article 101(1) if the
parties have expressed their joint intention to behave on the market in a
certain way.172 An agreement, therefore, can be said to exist when the
parties adhere to a common plan which limits or tends to limit their
individual commercial conduct by determining the lines of their behaviour
in the market. It does not have to be made in writing, no formalities are
necessary, and no contractual sanctions or enforcement measures are
required. The agreement may be express or implicit in the behaviour of the
parties.173 The Commission will not make a distinction in applying the test
of whether there is an ‘agreement’ whether the alleged infringement is
horizontal or vertical.174
The fact that an undertaking does not conduct itself in the manner
agreed, will not necessarily contradict the existence of an agreement.175 It
may also be the case that despite colluding with other undertakings, an
undertaking which follows a different course may simply be trying to
exploit the situation for its own benefit.176
The Court has held that if the Commission is able to establish attendance by
a company at a meeting where cartel behaviour is discussed, that will of
itself be sufficient to implicate the party attending, in the cartel unless the
party can put forward evidence to establish that its participation was
without any anticompetitive intention. This will be the case even if the
company did not act on the outcome of discussions, as it will have been
presumed to have given the others to believe it would subscribe to what was
agreed. This presumption will be rebutted if the company publicly distanced
itself from the cartel, by making clear to the other participants that it was
not going to participate in the cartel.177 The Court of Justice has stated that
the company in question should write to the other participants recording its
position or contacting the competition authorities denouncing the cartel.178
(Cartels are discussed in more detail in Chapter 5 Article 101 TFEU:
Horizontal Agreements).
4.3.2 Concerted Practice
Article 101 (and also Article 102) will only apply where trade between
Member States of the EU is affected. An agreement may affect trade
between Member States if it is ‘possible to foresee with a sufficient degree
of probability on the basis of a set of objective factors of law or of fact that
the agreement in question may have an influence, direct or indirect, actual
or potential, on the pattern of trade between member states, in such a way
that it might hinder the realisation of the objectives of a single market
between states’.189
The Court has ruled,190 and the Commission has stated in Guidance
discussed below, that agreements will normally fall outside Article 101
even where they have as their object or effect the prevention, restriction or
distortion of competition, if they are not capable of appreciably affecting
trade between Member States.191
The requirement for an effect on trade on trade between Member
States does not mean that agreements between two enterprises situated in
the same Member State will not be caught by Article 101, which may be the
case where, for example, it makes it more difficult for other enterprises to
penetrate the market or results in sales into the Member State being
impeded.
The Commission has issued Guidelines on the effect of trade concept
contained in Articles 101 and 102,192 in which it quantifies which
agreements are in principle not capable of appreciably affecting trade
between Member States. It states that, in principle, agreements are not
capable of appreciably affecting trade between Member States when the
following cumulative conditions are met:
(i) the aggregate market share of the parties on any relevant market
within the EU affected by the agreement does not exceed 5 per cent;
and
(ii) in the case of horizontal agreements, the aggregate annual EU
turnover of the undertakings concerned in the products covered by
the agreement does not exceed EUR 40 million. In the case of
agreements concerning the joint buying of products the relevant
turnover shall be the parties’ combined purchases of the products
covered by the agreement. In the case of vertical agreements, the
aggregate annual EU turnover of the supplier in the products covered
by the agreement does not exceed EUR 40 million.193
(i) the aggregate market share held by the parties to the agreement does
not exceed 10 per cent on any of the relevant markets affected by the
agreement, where the agreement is made between undertakings which
are actual or potential competitors on any of those markets
(agreements between competitors); or
(ii) the market share held by each of the parties to the agreement does not
exceed 15 per cent on any of the relevant markets affected by the
agreement, where the agreement is made between undertakings which
are not actual or potential competitors on any of those markets
(agreements between noncompetitors).
Until 1 May 2004, it was possible for the parties to an agreement to notify it
to the Commission for exemption or negative clearance, and benefit from
immunity from fines from the date of notification. It was also only possible
for the Commission to grant exemption. From 1 May 2004 with the entry
into force of Regulation 1/2003, it was no longer possible to notify
agreements to the Commission.210 Rather, whether the conditions of
exemption were met became a matter of self-assessment by the parties and
their advisers, by reference to Article 101(3) criteria and analysis
thereunder. The duty of compliance is an ongoing duty and if conditions,
such as market power of the parties and/or their competitors, change after
the initial assessment of an agreement under Article 101(3), it is possible
that the conditions of Article 101(3), such as indispensability, or
competition not being eliminated in a substantial part of the market, may no
longer be fulfilled. The criteria for exemption are discussed in turn below.
There is also discussion in specific cases, such as airline alliances, at
Chapter 8 Mergers and Alliances, and in relation to vertical agreements at
Chapter 6 Article 101 TFEU: Vertical Agreements.
On 1 May 2004, application of EU competition law and Article
101(3) by NCAs and courts also became possible, enabling them to grant
exemption to agreements.
The agreement must not afford the parties the possibility of eliminating
competition in respect of a substantial part of the products or services
concerned. Whether this is the case depends on whether the market was
competitive prior to the agreement and the reduction of competition as a
result of the agreement. Market share of the parties and of their competitors,
and the competitive constraint they impose, will be relevant.226 The fact
that a party to an agreement is dominant does not necessarily mean that the
agreement may not merit exemption, but an analysis of efficiencies will be
required. One potential example highlighted by the Commission would be
where a dominant company enters into a joint venture that is a non-full
function JV which restricts competition, but involves a substantial
integration of assets (such as an airline alliance).227
159. Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979, Case T–319/99 Fenin v
Commission, [2003] ECR I-357.
160. Case 170/83 Hydrotherm [1984] ECR 2999, para. 11, and Case T-234/95 DSG v
Commission [2000] ECR II 2603, para. 124).
161. See Case 22/71 Beguelin Import v GL Import Export [1971] ECR 949; Case C-73/95P Viho
Europe v Commission (Parker Pen) [1996] ECR-I 5457.
162. Communication from the Commission — Guidelines on the applicability of Article 101 of
the Treaty on the Functioning of the European Union to horizontal cooperation agreements
OJ C 11, 14.1.2011, p. 1 para. 11.
163. Viho v Commission Case C-73/95, Viho, supra.
164. Commission Guidelines on Vertical Restraints 2010 OJ C 130 p.1 paras 18–22. See Chapter
6 Article 101 TFEU: Vertical agreements.
165. Case C-343/95 Diego Cali & Figli [1997] ECR 1547, paras 22–23.
166. Case C-364 Eurocontrol [1994] ECR I 43 at para. 17.
167. Diego Cali & Figli supra paras 22-23.
168. Case T-155/04, SELEX v Commission ECR [2006] II – 4803 paras 86-92.
169. Case 66/86 Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur
Bekämpfung unlauteren Wettbewerbs e.V. 1989 ECR 803.
170. Case T-128/98 Aéroports de Paris (ADP) v Commission ECR [2000] II 3929, para. 108,
130, upheld by the ECJ in case C-82/01, paras 74–83 – ADP was found to have abused a
dominant position by charging discriminatory commercial fees from suppliers or users
engaged in groundhandling or self-handling activities relating to catering. See also Chapter
7 Abuse of a Dominant Position.
171. See for example the Passenger and Cargo Agency Programmes, Decisions 91/480 and
91/481, discussed in Chapter 6 Article 101 TFEU: Vertical agreements.
172. Joined Cases T-305/94 etc Limburgse Vinyl Maatschappij NV and others v Commission
(PVC II)13; Case T-41/96 Bayer AG v Commission [2000] ECR II 3383 para. 69.
173. Bayer AG supra; Polypropylene OJ 1986 L230/1; Commission Case COMP/F/38.638 —
Butadiene Rubber and Emulsion Styrene Butadiene Rubber para. 257.
174. Nintendo [2003] OJ L25553 para. 323.
175. Case T-89 Huls v Commission [1992] II 499 para. 127.
176. Case T-18/03 CD-Contact Data Gmbh v Commission [2009] ECR II 1021 para. 67.
177. Case C-199/92 Huls para. 155; Aalborg Portland v Commission Joined Cases C-204/00 P,
C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P, General Court [2004] ECR I-123 para. 82.
178. See Case C-291/98 P Sarrió v Commission [2000] ECR I-9991, para. 50).
179. Cases 40/73 etc. Suiker Unie v Commission [1975] ECR 1663, at para. 173 (‘Suiker Unie’);
Case C-199/92P Huls AG v Commission.
180. Joined Cases T-25/95 and others, Cimenteries CBE and others v Commission, [2000] ECR
II 491 para. 1849.
181. Case C-309/99 Wouters and others v Algemene Raad van de Nederlandse Orde van
Advocaten [2002] ECR I 1577 para. 62. The Dutch Bar Council was found to be an
association of undertakings, the potentially restrictive rules could nevertheless be found to
be outside Article 101(1).
182. Ibid para. 107.
183. Cases C-184/13 etc API v Ministero delle Infrastrutture e dei Trasporti, – measures fixing
minimum tariffs for road transport in Italy not justifiable on road safety grounds.
184. Case C-250/92, Gøttrup-Klim e.a. Grovvareforeninger v Dansk Landbrugs Grovvareselskab
AmbA. [1994] ECR I – 5641.
185. Hofner supra.
186. Case C-35/96 Commission v Italy [1998] ECR I 3851 para. 50.
187. National Sulphuric Acid Association Ltd OJ L260 1 October 1980 p24.
188. Case 45/85 Verband der Sachsversicherer v Commission – a recommendation requiring
annual increases in premiums for fire insurance found to breach Article 101(1).
189. Case C-5/69 Völk v Vervaecke [1969] ECR 295 para. 5.
190. Ibid.
191. De Minimis Notice para. 8.
192. Commission Notice — Guidelines on the effect on trade concept contained in Articles [101]
and [102] of the Treaty OJ C 101, 27.4.2004, pp. 81–96.
193. Notice on effect on trade para. 52.
194. Commission Recommendation of 6 May 2003 concerning the definition of micro, small and
medium-sized enterprises OJ L 124, 20.5.2003, pp. 36–41; see generally
http://ec.europa.eu/growth/smes/business-friendly-environment/sme-
definition/index_en.htm.
195. Volk v Vervaeke para. 7.
196. Consten and Grudig v Commission [1966] ECR 299; Case 19/77 Miller International
Schallplatten GmbH v Commission 1978 ECR 131 para. 15 – the Court held that a detailed
analysis of the effects would be required if the analysis of the clauses in question did not
reveal the effect on competition to be sufficiently serious.
197. Courts’ approach summarised in Commission Guidelines on the application of Article
[101(3)] of the Treaty OJ C 101, 27.4.2004, p97, para. 21.
198. See for example Case COMP/39.596 – BA /AA /IB; Case AT.39964 – Air France /KLM
/Alitalia /Delta, ‘SkyTeam alliance’, Decision pursuant to Article 9 Regulation 1/2003 12
May 2015, para. 40; Alliances involving extensive cooperation are discussed in Chapter 8
Mergers and Alliances.
199. Case C-8/08 T-Mobile Netherlands and Others [2009] ECR I 4529; Case C-226/11 Expedia
13 December 2012.
200. 200 Case C-67/13 P Groupement des cartes bancaires v Commission 11 September 2014.
201. Commission Notice on agreements of minor importance. The latest version is at: Official
Journal of the European Union, C 291, 30 August 2014.
202. De Minimis Notice para. 8.
203. Guidance on restrictions of competition ‘by object’ for the purpose of defining which
agreements may benefit from the De Minimis Notice accompanying the Commission Notice
on agreements of minor importance which do not appreciably restrict competition under
Article 101(1) TFEU (De Minimis Notice); Staff Working Document and the Notice are
available at: http://ec.europa.eu/competition/antitrust/legislation/deminimis.html (revised
version 3/06/ 2015 post Cartes Bancaires decision.).
204. Case 22/71 Béguelin Import v G.L. Import Export [1971] ECR 949 para. 29.
205. Case 48/72 Brasserie de Haecht v Oscar Wilkin and Marie Janssen (II) 1973 E.C.R. 77 paras
26-27.
206. Case 319/82 Société de Vente de Ciments et Bétons de l’Est SA v Kerpen & Kerpen GmbH
und Co. KG [1983] ECR 4173.
207. Ibid para. 12.
208. Case C-453/99 Courage Ltd v Bernard Crehan ECR 2001 I 6297. A tied tenant of a large
chain could, to the extent that he had suffered loss as a result of long-term exclusivity
obligations to purchase only from the chain, bring an action in the national courts in respect
of such loss.
209. Ibid.
210. Regulation 1/2003 Council Regulation (EC) No. 1/2003 of 16 December 2002 on the
implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty OJ
L 1, 4.1.2003, p. 1.
211. Regulation 1/2003, Article 2.
212. Commission Guidelines on the application of Article [101(3)] of the Treaty OJ C
101,27.4.2004, p97 (‘Guidelines on Article 101(3)’) paras 59, 66, 70.
213. Ibid para. 42.
214. Ibid para. 63.
215. Ford /Volkswagen OJ 1993 L20/14 para. 26.
216. Commission Memo 10/676, 14 December 2010; see also discussion Bellamy & Child 7th
Ed 3.048.
217. Guidelines on Article 101(3) para. 83.
218. Ibid para. 84.
219. Horizontal Guidelines para. 43.
220. Star Alliance 23 May 2013 paras 55 et seq (See Chapter 8 Mergers and alliances).
221. Guidelines on Article 101(3) paras 85, 90, 101.
222. Ibid para. 102.
223. Ibid para. 73.
224. Ibid para. 76.
225. Ibid para. 81.
226. Ibid paras 107–109.
227. Ibid para. 106.
228. Council Regulation (EC) No. 487/2009 of 25 May 2009 on the application of Article 81(3)
of the Treaty to certain categories of agreements and concerted practices in the air transport
sector.
229. Commission Regulations 316/2014 of 21 March 2014 on the application of Article 101(3)
ofthe Treaty on the Functioning of the European Union to categories of technology transfer
agreements; 1217/2010 of 14 December 2010 on the application of Article 101(3) ofthe
Treaty on the Functioning of the European Union to certain categories of research and
development agreements; 1218/2010 of 14 December 2010 on the application of Article
101(3) of the Treaty on the Functioning of the European Union to certain categories of
specialisation agreements. A discussion of these block exemptions is beyond the scope of
this work and readers are referred to competition texts such as Bellamy& Child 7th Edition
2013, Van Bael & Bellis 5th Edition 2010, and Whish & Bailey 8th Edition, 2015).
CHAPTER 5
Article 101 TFEU: Horizontal Agreements
5.1 OVERVIEW
Horizontal agreements are agreements entered into by companies operating
at the same level of production or distribution in the market, in essence,
actual or potential competitors. This chapter will deal with the most serious
form of horizontal agreements, namely cartels, with focus on cartels
between airlines. It will also deal with information exchange, trade
associations and code-sharing agreements (CSAs). Forms of horizontal
cooperation within alliances such as coordination of schedules, routes,
pricing, and revenue and cost sharing are discussed in Chapter 8 Mergers
and Alliances.
As a general principle, outside of cartels where market share has
limited relevance, cooperation between competitors is most likely to lead to
competition concerns if the parties have high market shares, with remaining
competitors being unable to constrain the market power of the parties.
Concerns will be more serious if there are high barriers to market entry,
such as large investments required, regulatory barriers, or impossibility of
access to infrastructure, such as airports or slots.
5.2 CARTELS
5.2.1 Overview
Cartels are by their nature covert and parties take steps to preserve secrecy.
Use of a designated email account for cartel communications, codenames
for terms used, and storage of agreements off office premises have been
employed, including in cartels in the air transport sector. The Commission
enjoys extensive powers of investigation, having the power to conduct
‘dawn raids’, which are discussed in Chapter 9 Enforcement, but since
1996, it has also offered immunity from fines to a participant in a cartel
who ‘blows the whistle’, and reductions of up to 50 per cent for other cartel
members who cooperate with its investigation, depending on the ‘added
value’ of the cooperation.232 Individual EU Member State competition
authorities operate similar schemes on a national level, as do many other
jurisdictions worldwide.
The majority of cartels are now exposed as a result of leniency
applications, which may be prompted by factors such as disagreements
among cartelists if over time the cartel breaks down, change of management
of a cartel member, acquisition of a cartelist during which infringements are
discovered through due diligence, or general nervousness about
investigations or customer complaints. Immunity from fines does not
remove the liability of the whistleblower to damages actions by victims of
the cartel, though the Commission has, in order not to discourage leniency
applications, provided in the Damages Directive that leniency applications
should be protected from disclosure in national court proceedings.233
As regards leniency procedures under national law, given the absence
of a harmonised EU system on leniency, there is a risk that an applicant for
leniency in one Member State may not qualify for leniency in other
Member States. The Commission advises that leniency applicants should be
granted favourable treatment and should apply for leniency to all national
competition authorities (NCAs) which could act against the infringement in
question.234
The most high profile decision on price fixing by the Commission in the air
transport sector related to the fixing of a component of price, namely
surcharges, principally on fuel prices. The decision and fines of EUR 799
million followed the largest cartel investigation in the air transport sector
with dawn raids by the Commission – and investigations by authorities in
other jurisdictions such as the US, Canada, South Korea, Japan and
Australia. The European Commission’s decision and fines were overturned
on appeal in December 2015 by the General Court on grounds of internal
inconsistencies which were found to infringe the parties’ rights of defence,
but the Commission subsequently adopted a new decision in respect of the
cartel. The case is of interest in the respects discussed below:
(1) Background
The European Commission did not appeal against the ruling of the General
Court – which would be on points of law only – to the Court of Justice, but
it issued a new decision (unpublished at the date of publication of this
work) in which it stated that it addressed the Court’s conclusions by
bringing the operative part of its 2010 decision in line with the reasoning
part, while remaining identical in terms of the behaviour targeted by the
Commission. The fines remained unchanged, save for a reduction in the
fine on Martinair, which had been capped at 10 per cent of the company’s
total turnover in 2009, but was reduced to reflect that its turnover in 2016
was lower than in the year preceding the adoption of the decision.250 BA, in
respect of which the General Court’s annulment was partial, appealed
against the ruling to the Court of Justice, in so far as it limited its annulment
of the Commission Decision, rather than annulling it in unqualified
terms.251
5.2.5.1 Definition
CSAs may be ‘free-flow’ CSAs – these offer free access to the operating
carrier’s inventory. These are versatile, can deal with small loads, and offer
virtually last seat availability, and are generally preferred by airlines. They
require investment in IT, including a mapping facility between the booking
classes in the two carriers’ revenue management systems.282 If the code-
share partners are competitors, free-flow CSAs may give rise to concerns
given they may result in a reduction of competition.
‘Blocked space’ CSAs are more rigid, determining the number of
seats to be sold in advance by the marketing carrier and at a price agreed.
Such agreements may be appropriate for large numbers of passengers
travelling together, where one or more of the airlines have poor IT systems,
or there is a stipulation in an ASA compelling the carriers to enter into a
blocked space agreement.283
Blocked space agreements fall into two categories. Under a ‘hard’
blocked space agreement, the marketing carrier pays the operating carrier
the agreed price for the block of seats reserved, irrespective of whether it
sells the seats, so such agreements would tend to be less restrictive of
competition. The marketing carrier and the operating carrier each bear the
commercial risk of unsold seats, and both parties are responsible for the sale
of their allocated number of seats. Blocked space agreements have been
used as a remedy by the Commission in mergers or alliances where
concerns are raised on certain routes, the Commission having required, in
certain cases, the parties to agree to enter into blocked space agreements on
request by a new entrant to facilitate market entry by other carriers.284
Under ‘soft’ blocked space agreements, which account for the
majority of blocked space agreements, it is possible for the marketing
carrier to return unused capacity to the operating carrier, according to terms
agreed between the carriers, with or without penalty up to a given time
before departure.285
230. This corresponds to the general definitions of ‘cartel’ in the EU Directive 2014/104/EU on
certain rules governing actions for damages under national law for infringements of the
competition law provisions of the Member States and of the European Union (OJ L 349 of 5
December 2012, pages 1-19).
231. See http://www.internationalcompetitionnetwork.org/working-
groups/current/cartel/templates.aspx.
232. For guidance on immunity and cooperation see Commission Notice on Immunity from fines
and reduction of fines in cartel cases (OJ C 298 of 8 December 2006, pages 17-22).
Reductions reflect the timing of companies’ cooperation and the extent to which the
evidence they provide help the Commission to prove the respective cartels.
233. Damages Directive, supra, recital 26.
234. See European Competition Network Leniency (November 2012; Regulation 1/2003 Article
11.
235. Commission Decision COMP/E-2/37.857– Organic Peroxides.
236. Case T-99/04 Treuhand v Commission [2008] ECR II 1501 para. 122, the infringement
related to coordination of a cartel in the market organic peroxides, used in the plastic and
rubber industries. See also Commission Decision Case COMP/38589 — Heat Stabilisers,
summarised in OJ 2010 C 307, imposing a fine, upheld by the General Court and ECJ in
Case C-194/14 P, Treuhand v Commission, 22 October 2015.
237. Article 101(1)(a), cases discussed below; see generally Revised Version of 03/06/2015
Commission Guidance on restrictions of competition ‘by object’ for the purpose of defining
which agreements may benefit from the De Minimis Notice, SWD(2014) 198 final, and
Chapter 8 Mergers and Alliances.
238. See for example Case 38549 Architectes Belges recommended minimum fees of a national
association of architects; Joined Cases C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-
250/99 P to C-252/99 P and C-254/99 P ICI v Commission – target prices and target quotas
were fixed, and initiatives to raise price levels and monitor the operation of the
arrangements; Commission Decision Far East Trade Tariff Charges and Surcharges
Agreement – agreement not to offer discounts; Commission Decision CASE AT.39462 –
Freight forwarding 28 March 2012 – agreements on surcharges; Commission Decision in
Airfreight alleging agreements between carriers on surcharges was annulled by the General
Court (see below).
239. Commission Decision of 28 January 2009 relating to a proceeding under Article 101 Case
COMP/39406 – Marine Hoses; upheld by General Court.
240. Commission Decision of 28 March 2012 relating to a proceeding under Article 101 TFEU
and Article 53 of the EEA Agreement (Case COMP/39.462 — Freight forwarding; largely
upheld on appeal by the General Court, Case T-267/12, Deutsche Bahn et ors v Commission
29 February 2016.
241. T-264/12 UTi v Commission, General Court 29 February 2016. As regards one of the parties
UTi Worldwide, the Court reduced the fine from EUR 3.07 million to EUR 2.97 million, on
the basis that which its liability was solely derived from behaviour of its, subsidiaries and
that the liability of the parent should not exceed that of its subsidiaries in such cases.
242. The criteria for determining the amount of the fine are set out in the Commission Guidelines
on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No.
1/2003 (OJ 2006 C 210 pages 2-5.
243. Commission Decision (Case COMP/39258 — Airfreight). A provisional non-confidential
version of the Decision was published on 8 May 2015, available on the DG COMP website
http://ec.europa.eu/competition/antitrust/cases/dec_docs/39258/39258_7008_7.pdf. Airlines
fined were Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan
Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines.
244. There were also fines and settlements in other jurisdictions such as the US, with officers
from some of the airlines concerned imprisoned in the US and Australia. In the passenger
travel market, there was also a UK investigation of surcharges on transatlantic passenger
travel, with a fine imposed on BA following a leniency application by Virgin: OFT decision
19 April 2012 imposing a fine of GBP 58.5 million, reduced from GBP 121 million
imposed in August 2007.
245. These limited powers were under the ‘transitional regime’ that applied to the air transport
sector then Articles 88 and 89 EEC Treaty (now, as amended, Articles 104 and 105 TFEU,
discussed at Chapter 2 section 2.6.4). See for example para. 1123 on Commission Airfreight
decision provisional non-confidential version, published on 08.05.2015.
246. Case C-359/95 Commission v Ladbroke Racing ECR 1997 I 6265.
247. Commission Decision 2001/76 of 18 July 2001 (OJ L 265 5 October 2001 p. 15).
248. The actions within the EU jurisdictions are ongoing as at the date of publication so are not
discussed, and actions or settlements in non-EU jurisdictions are beyond the scope of this
work.
249. Judgments of 16 December 2015 in Cases T-9/11 Air Canada, T-28/11 Koninklijke
Luchtvaart Maatschappij, T-36/11 Japan Airlines, T-38/11 Cathay Pacific Airways, T-39/11
Cargolux Airlines International, T-40/11 Latam Airlines Group and Others, T-43/11
Singapore Airlines and Others, T-46/11 Deutsche Lufthansa and Others, T-48/11 British
Airways, T-56/11 SAS Cargo Group and Others, T-62/11 Air France-KLM, T-63/11 Société
Air France and T-67/11 Martinair Holland v Commission.
250. European Commission – Press release_IP/17/661, 17 March 2017: ‘Commission re-adopts
decision and fines air cargo carriers €776 million for price-fixing cartel’.
251. Case C-122/16 P: Appeal brought on 26 February 2016 by British Airways plc against the
judgment of the General Court delivered on 16 December 2015 in Case T-48/11: British
Airways plc v European Commission OJ C 191, 30.5.2016, pp. 9–10. BA argued that the
General Court wrongly found itself restricted by the ‘ultra petita’ principle according to
which a court may not decide more than it has been asked by the parties. It argued this is on
the basis that the General Court had of its own motion found there to be fundamental public
policy defects which vitiated the European Commission’s Decision entirely. Whether BA’s
appeal shall be continued given the Commission Decision of 17 March 2017 is not known.
252. Case C-41/96 ACF Chemie farma NV v Commission (relating to quinine).
253. Joined cases 29/83 and 30/83 CRAM v Commission (relating to zinc).
254. Commission Decision 2001/716/EC of 18 July 2001 relating to a proceeding pursuant to
Article 101 (COMP.D.2 37.444 — SAS/Maersk Air and COMP.D.2 37.386 — Sun-Air
versus SAS and Maersk Air) (OJ 2001 L 265, p. 15).
255. The procedures under Regulation 3975/87 are discussed in Chapter 2.
256. An appeal against the level of fines was upheld by the General Court Case T-241/01 [2005]
ECR 2005 II 2917; see also summary on weblink http://eur-lex.europa.eu/legal-
content/EN/SUM/?uri=CELEX:62001TJ0241.
257. Marine Hoses supra.
258. Related practices were demands by brokers for additional payments from insurers over and
above ordinary broker commission, based on volumes of business they placed. See also
European Commission Staff Working Document – Sector Inquiry under Article 17 of
Regulation (EC) No. 1/2003 on business insurance (Final Report) – (COM(2007) 556 final.
259. See UK Decision of the Office of Fair Trading CA98/02/2009 Bid rigging in the
construction industry in England 21 September 2009; fines in relation to ‘cover pricing’
significantly reduced on appeal by the Competition Appeal Tribunal Case Nos: 1117/1/1/09
et ors.
260. Market share was a criterion for market sharing agreements in Marine Hoses supra.
261. Case C-209/07 Beef Industry Development Society v Barry Brothers (Carrigmore) Meats
[2008] ECR I 8637.
262. case C-68/12 Judgment in Case C-68/12 Protimonopolný úrad Slovenskej republiky v
Slovenská sporitel’ňa a.s.– preliminary ruling on a reference from Slovakian court, Slovak
banks having been condemned by the national competition authority of coordination of
contracts with a non-bank financial institution offering cashless foreign exchange
transactions.
263. Case IV/35.691 Pre-insulated pipes REF.
264. OJ C 11/1 14/01/2011.
265. Commission Horizontal Guidelines 2011 para. 60.
266. Joined Cases 40/73 and others, Suiker Unie v Commission [1975] ECR para. 174; Case C-
8/08, T-Mobile, para. 35.
267. Horizontal Guidelines para. 61.
268. See Case C-199/92 P, Hüls, [1999] ECR I-4287, para. 162; Case C-49/92 P, Anic
Partezipazioni, [1999] ECR I-4125, para. 121.See also Chapter 4 section 4.3.1.2
269. T-Mobile supra para. 59.
270. Horizontal Guidelines para. 86.
271. Horizontal Guidelines para. 74.
272. UK Agricultural Tractor Registration Exchange, OJ 1992 L68/19, upheld on appeal Case C-
7/95 P, John Deere v Commission [1998] ECR I 3111, para. 67.
273. Ibid. It may be that depending on the characteristics of the market a lesser period may be
permissible – six months was accepted by the UK authorities in ‘What If?’ case – Private
motor insurance: exchange of data 2 December 2011.
274. Commission Regulation (EU) No. 267/2010 of 24 March 2010 on the application of Article
101(3) of the Treaty on the Functioning of the European Union to certain categories of
agreements, decisions and concerted practices in the insurance sector OJ L 83, 30.3.2010, p.
1. This Regulation expired on 31 March 2017.
275. Horizontal Guidelines para. 63.
276. Case C-85/89, Ahlström osakeyhtiö and others v Commission.
277. European Commission – Press release Commission accepts commitments by container liner
shipping companies on price transparency 7 July 2016; Decisions available at
http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39850.
278. ‘Block exemptions’ which formerly applied to categories of cooperation agreements
between airlines are summarised in Chapter 2.
279. Commission Decision 94/215/ECSC of 16 February 1994 relating to a proceeding pursuant
to Article 65 of the ECSC Treaty concerning agreements and concerted practices engaged in
by European producers of beams OJ 1994 L 116, p. 1, upheld by the General Court and
ultimately ECJ Case C-179/99 P, Eurofer v Commission, ECR [2003] I – 10740 More recent
case law has involved the imposition of fines on third party facilitators. See section 5.2.3
above.
280. See generally Communication from the Commission—Guidelines on the applicability of
Article 101 of the Treaty on the Functioning of the European Union to horizontal
cooperation agreements OJ C 11, 14.1.2011, p. 1–72, paras 257 et seq.
281. Double marginalisation arises when both operators in a supply relationship mark up the
prices they charge their respective partner above their respective marginal costs, which leads
to deadweight loss. In CSAs where these mark-ups are substantially reduced or eliminated,
this may lead to lower prices. See generally CASE COMP/AT.39595 – Continental/United/
Lufthansa/Air Canada 23 May 2013 (Star Alliance A++) para. 64.
282. See generally Report prepared by Steer Davies Gleave and Clyde & Co for the European
Commission ‘Competition impact of airline code-share agreements’ in 2007 (‘SDG /Clyde
Report’): ec.europa.eu/competition/sectors/transport/reports/airlinecodeshare.pdf.
283. See SDG / Clyde Report 2007 – para. 5.13.
284. See for example Case No. COMP/M.3770 – Lufthansa/Swiss, para. 197.
285. The SDG / Clyde Report found that this may frequently be without penalty up to 72 hours in
advance of the flight para. 5.14.
286. See for example Case No COMP/M.7270 - Cesky Aeroholding/ Travel Service / Ceske
Aeroline 18 December 2014.
287. An example would be BA selling a journey from London to Albuquerque, BA operating
London to Dallas, American Airlines operating Dallas to Albuquerque SDG / Clyde Report
para. 3.7.
288. ECA Report supra, para. 30; see also T-374/94 – European Night Services, ECR 1998, II
3141, para. 137.
289. Cesky Aeroholding/ Travel Service / Ceske Aeroline supra, para. 105.
290. Ibid para. 106.
291. Commission Press Release IP/11/147, 11 February 2011. Cases COMP/39794 Lufthansa/
Turkish Airlines and COMP/39860 Brussels Airlines/TAP Air Portugal. Lufthansa’s CSA
came to an end in the course of 2014.
292. Commission Press Release 16/3653, 27 October 2016 (proceedings ongoing).
293. SAS / Maersk supra.
294. Commission Press Release MEMO 11/926 19 December 2011.
295. See also Chapter 2 and Chapter 6 Article 101 TFEU: Vertical Agreements and Chapter 7
Abuse of a Dominant Position.
296. Commission Press Release IP/00/835; Comp Rep EC 1991 p. 73.
CHAPTER 6
Article 101 TFEU: Vertical Agreements
6.1 OVERVIEW
The VBER applies to all vertical agreements concerning the sale of goods
or services, with the exception of motor vehicles which have their own
specific block exemption. The VBER does not apply to agreements for the
licensing of IP such as patents or copyright, save where they are ancillary to
a vertical agreement. Most commonly, this would be the licensing of a
trademark to a distributor selling the supplier’s products.
The VBER lists hardcore restrictions, the inclusion of which will exclude
the whole agreement from the VBER, irrespective of the market shares of
the parties, although the application of Article 101(3) is not necessarily
excluded in such a case.306
The first hardcore restriction is resale price maintenance – the fixing of the
price or minimum price at which distributors can resell products, or in the
case of an agent which is an ‘independent agent’, an obligation preventing
or restricting the agent from sharing its commission with the customer (see
generally section 6.4 Agency below).307 The Vertical Guidelines leave open
the possibility that where the parties’ market shares are very low, the
restriction of competition may not be appreciable, so that Article 101(1)
may not apply.308
The imposition of maximum resale prices is generally permitted, as
are recommended prices, provided they are indeed recommended only and
not accompanied by threats or incentives.309
The VBER obviously does not apply where the market share of any of the
parties exceeds 30 per cent, to certain agreements between competitors, or
to the non-compete restrictions excluded from the VBER, discussed above.
There is, however, no presumption that an agreement is contrary to Article
101 simply because the threshold is exceeded (with many large
manufacturers or buyers it will be) or because excluded restrictions are
present in an agreement. Rather, they will fall to be considered under
Article 101(1) and 101(3). The Commission’s Vertical Guidelines offer
guidance on the interpretation of the VBER and criteria for assessment of
such cases. A detailed discussion of these is beyond the scope of this work.
In summary, however, as regards non-compete or other exclusivity
obligations discussed above, the question to consider will be whether they
foreclose competitors from the market to such an extent that competition is
restricted. The Article 101(3) analysis will focus on the benefits resulting
from the agreement, including the proportionality of the restrictions (as
where one party has incurred significant expenditure to provide goods or
services to a given customer, which may justify a longer duration), and
whether there is a competitive market such that competition is not
eliminated in a substantial part of the market. Exclusivity obligations
imposed by dominant undertakings will require specific justification.
Restrictions on suppliers are not prohibited, or addressed, by the
VBER and are thus a matter for individual assessment under Article 101(3).
By way of guidance, obligations on suppliers to supply only one buyer in
the EU are not expected to raise concerns where the market shares of the
parties do not exceed 30 per cent, though factors such as duration and
nature of products are relevant.324
6.4.1 Overview
The Vertical Guidelines set out criteria for the assessment of agency
agreements.327 If an agent is ‘genuine’, Article 101 will not apply. The
General Court has held that a genuine agent working for the benefit of his
principal may, in principle, be treated ‘as an auxiliary organ forming an
integral part of the latter’s undertaking, who must carry out his principal’s
instructions and thus, like a commercial employee, forms an economic unit
with his undertaking’.328 There would not, therefore, be an agreement
between undertakings for the purposes of Article 101(1) TFEU.
In this regard, the Vertical Guidelines provide that an agency
agreement will fall outside Article 101 if the agent bears no, or only
insignificant risks in relation to the sales contracts it negotiates or
concludes. The Commission divides risks into three categories, any of
which will result in the agent being an independent undertaking. These are:
first, if the agent accepts risks under the contract with the customer, such as
non-payment by the customer, or liability to customers, such as loss under
the contract, for example, resulting from the air travel services, or
obligations to finance stocks / ownership of goods, such as proprietary
interest in inventory; second, market-specific investments required to carry
out its functions, such as equipment or staff training costs or marketing
costs. Risks related to the cost of providing agency services in general, such
as costs of premises or personnel, or the agent’s income being dependent on
the principal’s success, will not prevent the agent from being deemed a
genuine agent; or third, if the agent is required to perform other activities,
not as an agent, but for its own risk.329
Where an agent acts for more than one principal, that does not of
itself make Article 101(1) applicable330 but it may do so.331 Even in cases
where an agent would be a genuine agent, Article 101 could be infringed, if
for example, a number of principals use the same agents to collude on
marketing strategy or exchange commercially sensitive information
between the principals.332
297. For a detailed discussion of vertical agreements generally see competition texts referred to
in the Introduction and Vertical Agreements in EU Competition Law, Wijckmans and
Tuytschaever.
298. Discussed in Chapter 7 Abuse of a Dominant Position.
299. Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3)
TFEU to categories of vertical agreements and concerted practices 2010 OJ L 102 page 1;
accompanied by European Commission guidelines on vertical restraints (‘Vertical
Guidelines’) 2010 OJ C 130/1.
300. VBER recital 8.
301. See Chapter 4.5 for discussion of De minimis.
302. VBER Article 1(a).
303. Vertical Guidelines paras 23, 87. Small and medium-sized undertakings are currently
defined as undertakings which have fewer than 250 employees and have either an annual
turnover not exceeding EUR 50 million or an annual balance-sheet total not exceeding EUR
43 million (Commission Recommendation of 6 May 2003 concerning the definition of
micro, small and medium-sized enterprises OJ L 124, 20.5.2003, pp. 36–41).
304. See generally Case T-219/99 British Airways v Commission.
305. see Chapter 3 on ‘Market definition’ and Chapter 8.4.1 on market definition in the case of
mergers and alliances between airlines; see also Article 7 VBER on application of the
market share threshold).
306. In individual cases it may exceptionally be possible for hardcore restrictions to qualify for
exemption under Article 101(3). Limited cases by way of example are provided by the
Vertical Guidelines paras 60-64 which also refer to the Commission Guidelines on the
application of Article 101(3) more generally OJ C 101, 27.4.2004, p. 97 para. 18.
307. VBER Article 4(a); Vertical Guidelines paras 48-49.
308. Vertical Guidelines para. 10, referring to ECJ case law including Case 5/69 Volk v Vervaeke
[1969] ECR 295.
309. Vertical Guidelines para. 226.
310. VBER Article 4(b) and (c).
311. Vertical Guidelines para. 51.
312. Ibid paras 51-54.
313. The Commission stated geo-blocking is partly due to unilateral decisions by companies not
to sell abroad but also contractual barriers set up by companies preventing consumers from
shopping online across EU borders. See Commission Staff Working Document Geo-
blocking practices in e-commerce Issues paper presenting initial findings of the e-commerce
sector inquiry conducted by the Directorate-General for Competition 18.3.2016 SWD(2016)
70 final; See also Commission press release 18 March 2016 at http://europa.eu/rapid/press-
release_IP-16-922_en.htm;
314. Comp Rep EC 1993 p155.
315. VBER Article 4(e), Vertical Guidelines para. 59; see also Chapter 7 Abuse of a Dominant
Position section 7.4.4.
316. VBER Article 4(c) and (d).
317. 91/480/EEC: Commission Decision of 30 July 1991 relating to a proceeding pursuant to
Article [101] (case No. IV/32.659 IATA Passenger Agency Programme) J L 258, 16.9.1991,
p. 18; 91/481/EEC: Commission Decision of 30 July 1991 relating to a proceeding pursuant
to Article 101 (case No. IV/32.792 – IATA Cargo Agency Programme) OJ L 258,
16.9.1991, p. 29.
318. VBER Article 2(4).
319. VBER Article 1(d).
320. VBER Article 5(1)(a).
321. VBER Article 5(1)(b) and Vertical Guidelines para. 129; see also section 6.6 below and
Chapter 7 section 7.4.2
322. VBER Article 5(1)(b) and 5(3).
323. Vertical Guidelines para. 146; case law has permitted long-term supply agreements with
minimum purchase obligations in the region of 15 years in specific cases e.g., Shotton /
Maybank (OJ 1990 C106/3).
324. Vertical Guidelines paras 192 et seq.
325. VBER recitals 13-15.
326. Vertical Guidelines para. 12.
327. See Vertical Guidelines paras 12-21.
328. Case T-325/01 Daimler Chrysler AG v Commission [2005] ECR II 3319, the General Court
quashing a fine by the Commission of EUR 71.85 million, on the grounds that there was no
agreement between undertakings.
329. Vertical guidelines para. 15, see generally section 2.1 paras 12–17.
330. Ibid para. 13.
331. Case C-311/85 VZW Vereniging van Vlaamse Reisbureaus v Sociale Dienst [1987] ECR
3801, para. 19. Agent was to be regarded as independent where it sold travel organised by a
large number of different tour operators and tour operator sold travel through a very large
number of agents.
332. Vertical Guidelines para. 20.
333. Vertical Guidelines para. 49.
334. Ibid paras 17-20.
335. Case 1226/2/12/14 Skyscanner v CMA, Booking.com, Expedia, IHG and Skoosh
International [2014] CAT 16.
336. Vertical Guidelines para. 48.
337. European Commission press release IP-14-2661, 15 December 2014.
338. FCO Press release Bundeskartellamt issues statement of objections regarding
Booking.com’s ‘best price’ clauses 2 April 2015.
339. See DG comp webpage
http://ec.europa.eu/competition/antitrust/sector_inquiries_e_commerce.html.
340. See Vertical Guidelines para. 129.
341. Regulation 80/2009 on a Code of Conduct for computerised reservation systems and
repealing Council Regulation (EEC) No. 2299/89 OJ 2009 L 35/47, Article 2(4). CRSs are
also discussed in Chapter 2, 5 and Chapter 7.).
342. Regulation 80/2009 on a Code of Conduct for computerised reservation systems and
repealing Council Regulation (EEC) No. 2299/89 OJ 2009 L 35/47.
343. See generally Mid-term evaluation of Regulation 80/2009 on a code of conduct for
computerised reservation systems and repealing Council Regulation 2299/89, Final Report
September 2012, prepared for European Commission DG MOVE 27, by Steer Davies
Gleave, available on;
http://ec.europa.eu/transport/modes/air/studies/doc/internal_market/crs_fitness_check_repor
t_final.pdf.
344. It was reported in 2015 by travel bodies representing CRSs and travel agents (European
Technology and Travel Services Association) that a complaint to the European Commission
was brought against Lufthansa in respect of a booking fee it charges on fares booked
through websites using CRSs, arguing that it breached the Code of Conduct for CRSs.
CHAPTER 7
Article 102: TFEU Abuse of a Dominant Position
7.1 OVERVIEW
Article 102 TFEU prohibits the abuse of a dominant position by an
undertaking (or undertakings where ‘collective dominance’ is found) within
the EU or a substantial part (a single Member State, region or indeed an
airport, may suffice), in so far as it may affect trade between Member
States. Article 102 applies to unilateral conduct in the market, though this
could also include terms in agreements between a dominant firm and other
trading partners such as, potentially, exclusivity or similar obligations, such
terms being unenforceable by the dominant firm.
Abuses fall into two broad categories – ‘exclusionary’ abuses, which
exclude competitors from the market, such as refusal to deal or allow access
to essential infrastructure (such as airports, or computer reservation systems
(CRSs), tying or loyalty rebates, and ‘exploitative’ abuses, where the
dominant company such as an airport, exploits its market power by, for
example, charging excessive prices, discriminating without good reasons, or
imposing other unfair conditions on trading partners. Article 102 TFEU
does not contain an equivalent exemption for anticompetitive agreements as
set out in Article 101(3) TFEU, whereby a company’s conduct may be
permitted because of procompetitive benefits. However, a dominant
company may be able to show that conduct, which on the face it may
appear abusive, is objectively justified and proportionate.
7.2.1 Definition
7.4 ABUSE
7.4.1 Definition
Article 102 does not define ‘abuse’, but provides a non-exhaustive list of
abusive conduct in (a)–(d) above. Abuse has been described by the Court of
Justice as: ‘An objective concept relating to the behaviour of an undertaking
in a dominant position which is such as to influence the structure of a
market… and which, through recourse to methods different from those
which condition normal competition … has the effect of hindering the
maintenance of the degree of competition still existing in the market or the
growth of that competition.’356
While to hold a dominant position is not prohibited, abuse is. Further,
a dominant company has ‘a special responsibility not to allow its conduct to
impair genuine undistorted competition’.357 The focus of the Commission’s
enforcement under Article 102 is on ‘exclusionary abuse’ – whereby
dominant companies exclude their competitors by practices other than
competing on the merits.358 Absence of competition in a market may not
necessarily be the result of exclusionary practices by a dominant
undertaking, such as ‘thin’ routes, which may sustain only one carrier.
‘Exploitative’ abuses such as excessive prices, are prohibited, but in recent
years, tend to be dealt with by national competition authorities (NCAs)
applying EU competition and/or national law. The following are examples
of abuses.
At the same time as the BA decision, the Commission set out its policy on
commissions paid by airlines to agents. These included requirements that
commissions could only be differentiated or increased if they reflected costs
of distribution through different agents, or the value of services provided by
the agents; nor must they relate to previous reference periods exceeding six
months, set targets by reference to sales in a previous period i.e., not be
dependent on growth in sales, and must increase in a straight line above any
base stated in the agreement.367
After the BA decision, the Commission launched investigations into
eight other EU carriers offering incentive schemes to travel agents which
resulted in changes made to certain airlines’ schemes, without formal
decisions or fines.368
One of the first cases and fines imposed by the Commission in the air
transport sector was against Sabena in 1988, which was fined EUR 100,000
for refusing a competitor, London European Airways (LEA), access to its
CRS – Saphir.381 A CRS is the system that travel agencies use to make
airline bookings, with information on schedules, fares and availability.
The Commission found that Sabena had a dominant position on the
market for computer reservation services in Belgium and that this refusal
was designed to drive a competitor, offering lower fares, out of the Belgian
market. Sabena’s refusal had been on the grounds that LEA’s low fares
policy represented a potential threat, and it had agreed to admit LEA to its
CRS if it changed its pricing policy or reached a commercial arrangement
related to using Sabena groundhandling. The Commission found that this
aimed to artificially increase prices, to limit production and markets to the
prejudice of consumers, since Sabena’s refusal could result in LEA
abandoning its plan to open a route between Brussels and Luton, and that
Sabena had made the conclusion of a Saphir contract subject to the
conclusion by LEA of a groundhandling contract which was not related to
the subject matter of the first contract, all of which were abuses under
Article 102.382
In defining the market, the Commission had found that the
advantages of a computerised system (speed, quantity of data, immediate
reservation and issue of ticket, constantly updated information) were such
that this could not be regarded as equivalent to other means of making
reservations, so the ability to offer customers a computerised reservation
service was an important feature of an airline’s marketing policy. CRSs thus
constituted the relevant product market, and the territory in which bookings
were made through it, Belgium, was the relevant geographic market.383
Shortly after the commencement of proceedings, Sabena accepted
LEA into the Saphir reservation system on normal non-discriminatory
commercial terms to be agreed between the companies.
The Sabena case pre-dated the Regulation and Code of Conduct on
the operation of CRSs which was originally adopted in 1989 (Regulation
2299/89 see Chapter 2 Liberalisation of Air Transport).384 This required
that an airline, which owned or controlled a CRS must not discriminate
against a competing CRS, in particular by refusing to provide the same data
with equal timelines as that which it provided to its own CRS, and it sought
to prevent owner carriers from distorting competition by granting incentives
to travel agents to use their own CRS.
In the first decision under that Code, the Commission fined Lufthansa
EUR 10,000 for introducing incentives to travel agencies for the issue of
electronic tickets in Germany. Lufthansa part owned the CRS Start
Amadeus – and refused to make its ticketing function available to Start’s
competitor – Sabre, so incentives could only be earned by Start
subscribers.385 Proceedings were also brought by the Commission against
Air France for possible abuse of Article 102, for favouring Amadeus (part-
owned by Air France), by providing it with more accurate and prompt
information on certain domestic and international tariffs than it did to Sabre,
a CRS owned by American Airlines, thereby putting the latter at a
competitive disadvantage. The case closed after Air France agreed to offer
equivalent terms as to Amadeus, and reciprocal terms agreed between Sabre
and Amadeus.386
The general principle is that every user should be offered the same quality
of service, save where there is objective justification, as where there are
limits on capacity. This does not necessarily require all users to have the
same treatment, or that all airlines should be handled at the same terminal,
but they should receive equivalent treatment so far as possible.
Following complaints from airline users of Orly airport, the
Commission found that the operator, Aéroports de Paris (AdP) had
discriminated against competitors of Air France in its management of
passenger terminals, distributing traffic so as to benefit Air France, which
had exclusive use of a modern terminal with excess capacity, with
competitors grouped together in a terminal which was older and did not
have enough capacity to handle all the traffic. AdP agreed to re-distribute
traffic and carry out works to improve the older terminal and to provide
regular reports on the quality of service at each terminal, without
proceedings being brought.401
345. Case 27/76, United Brands [1978] ECR 207; Case 85/76 Hoffmann-La Roche & Co. v.
Commission [1979] ECR 461, para. 38.
346. An agreement between the parties, adoption of a common market strategy, common trading
terms and an oligopolistic market conducive to parallel behaviour could establish collective
dominance. Members of liner conferences have been found to be collectively dominant e.g.,
Cases T-19198 and others Atlantic Container Line v. Commission (‘TACA’) [2003] ECR II
3275.). For a detailed discussion generally see Bellamy & Child 7th Edition 10.047 et seq.
347. Communication from the Commission — Guidance on the Commission’s enforcement
priorities in applying Article [102] of the EC Treaty to abusive exclusionary conduct by
dominant undertakings, (‘Guidelines on exclusionary abuses’) OJ C 45, 24.2.2009, pp. 7–
20, para. 12.
348. Commission Decision 2000/74/EC, Virgin/British Airways, OJ L 30, 4.2.2000, pp. 1–24.
The Commission found that BA’s market share was over 2.2 times the combined share of its
four largest rivals in 1998. Case T-219/99, British Airways plc v Commission [2003] ECR II
5917, upheld by Court of Justice Case C-95/04 P, British Airways v Commission [2007]
ECR I-2331.
349. Case C-62/86, Akzo v. Commission, [1991] ECR I 3439, para. 60. The ECJ stated that this
was in itself, absent exceptional circumstances, adequate evidence of a dominant position.
350. United Brands supra paras 109–110.
351. Services to remote areas may qualify for State aid under the EU State aid rules under the
public services obligation exception, see Chapter 10.
352. IAG/Aer Lingus Case No. M.7541.
353. Case C-66/86 Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v. Zentrale zur
Bekämpfung unlauteren Wettbewerbs e.V. 1989 ECR 803 paras 39–41.
354. BA v. Commission supra – UK market for sales of tickets through travel agents.
355. Commission Decision 95/364/EC of 28 June 1995 relating to a proceeding pursuant to
Article 90(3) [now 106(3)] of the Treaty OJ L 216, 12.9.1995, pp. 8–14 – Brussels Airport
found to constitute a substantial part of the internal market, in line with case law findings in
the Port of Genoa case, Case C-179/90 Merci convenzionali porto di Genova SpA v.
Siderurgica Gabrielli SpA [1991] ECR I-5889.
356. Hoffmann-La Roche supra para. 91.
357. Case 322/81 Michelin v. Commission [1983] ECR 3461.), such that an abuse may occur,
even irrespective of any fault.
358. Guidelines on exclusionary abuses, supra.
359. Hoffmann-La Roche, supra para. 89.
360. Ibid.para 90
361. See for example Swedish Competition Authority, SAS 12 November 1999; Lufthansa
corporate discounts
http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2012/20_12_
2012_Lufthansa.html.
362. Commission Decision 2000/74/EC of 14 July 1999 relating to a proceeding under Article
[102] of the EC Treaty (IV/D-2/34.780 – Virgin/British Airways) OJ L 30, 4.2.2000, p. 1,
upheld by General Court in Case T-219/99, British Airways plc v Commission [2003] ECR
II 5917 para. 100; upheld by ECJ Case C-95/04 P, British Airways v Commission [2007]
ECR I-2331.
363. Ibid., paras 98–102.
364. British Airways v. Commission supra para. 21.
365. Case T-286/09 – Intel v. Commission, 12 June 2014.
366. Advocat General Opinion on an appeal by Intel to the Court of Justice, 20 October 2016 in
Case C-413/14 P Intel Corporation Inc. v Commission.
367. Commission Press Release IP/99/504, 14 July 1999.
368. See Competition Policy Newsletter No. 2, 2003, p. 65.
369. Guidelines on exclusionary abuses, supra para. 63.
370. Case T-83/91 Tetra Pak v. Commission, ECR [1994] II-755 para. 148; Case 62/86 Akzo
Chemie v. Commission [1991] ECR I-3359.
371. Akzo v. Commission, supra, para. 71.
372. Ibid., paras 182, 185–186.
373. EC Report on Competition 1990 para. 387.
374. Case T-340/03 France Télécom v. Commission [2007] ECR II-107, para. 228.
375. Akzo v. Commission, supra, paras 76 to 82, 115, and 131 to 140.
376. EC Report on Competition 1990 para. 387.
377. Commercial Solvents v. Commission Joined cases 6 and 7–73 ecr [1974] 223.
378. See also discussion at Chapter 6, section 6.3.2 Vertical Agreements: Restrictions on the Sale
of Spare Parts – and discussion of Regulation 330/2010.
379. Commission Decision 94/19/EC of 21 December 1993 in Case IV/34.689 Sea Containers v.
Stena Sealink — Interim Measures (OJ L 15, 18.1.1994, p. 8) and Commission Decision
92/213/EEC of 26 February 1992 in Case IV/33.544 British Midland v. Aer Lingus OJ L 96,
10.4.1992, p. 34.
380. Commission Decision IV/33.544, British Midland v. Aer Lingus OJ L 96, 10.4.1992, pp.
34–45.
381. Commission Decision 88/589/EEC IV/32.318, London European – Sabena, OJ L 317,
24.11.1988, pp. 47–54.
382. Article 102 includes the prohibition of tying: ‘making the conclusion of contracts subject to
acceptance by the other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject of such contracts’.
383. Ibid., para. 14–16.
384. Now Regulation (EC) No. 80/2009 of the European Parliament and of the Council of 14
January 2009 on a Code of Conduct for computerised reservation systems and repealing
Council Regulation (EEC) No. 2299/89.
385. 1999/618/EC: Commission Decision of 20 July 1999 on a procedure relating to the
application of Council Regulation (EEC) No. 2299/89 (Electronic ticketing) (notified under
document number OJ L 244, 16.9.1999, p. 56.
386. Commission Press Releases IP/99/171 15th March 1999, IP/00/835 25 July 2000. The case
was referred to the Commission by the US Department of Justice under the Positive Comity
provisions of the 1991 EU/US cooperation Agreement in the field of competition.
387. 95/364/EC: Commission Decision of 28 June 1995 relating to a proceeding pursuant to
Article 90(3) [now 106(3)] of the Treaty OJ L 216, 12.9.1995, pp. 8–14.
388. Ibid., para. 8, referring to Case C-179/90 Porto di Genova SpA v. Siderurgica Gabrielli SpA
[1991] ECR I-5889.
389. Commission Decision Brussels Airport, supra.
390. Ibid., paras 14–15, referring also to Case 30/87, Bodson v. Pompes funèbres [1988] ECR
479.
391. Ibid., para. 17.
392. Commission Decisions 1999/199/EC (IV/35.703 — Portuguese airports, OJ 1999 L 69 p.
31; 1999/198/EC: IV/35.767 – Ilmailulaitos/Luftfartsverket, OJ 1999 L 69, p. 24.
393. Case C-163/99 Portugal v. Commission ECR [2001] I-2613 paras 48–54.
394. A Groundhandling Directive Council Directive 96/67/EEC which provided, under certain
conditions, for the gradual opening up, from 1 January 1998 until 31 December 2002, of
access to the groundhandling market in Community airports.
395. Commission Decision 98/190/EC relating to a proceeding under Article 86 of the EC Treaty
(IV/34.801 FAG – Flughafen Frankfurt/Main AG) OJ L 72 p. 30; Commission Decision
98/387/EC on the application of Article 9 of Council Directive 96/67/EC to Frankfurt
Airport (Flughafen Frankfurt/Main AG) OJ L 173, 18.6.1998, pp. 32–44. The Decision
referred to Council Directive 96/67/EC on access to the groundhandling market at
Community airports OJ L 272, 25.10.1996, pp. 36–45.
396. Directive 2009/12/EC of the European Parliament and of the Council of 11 March 2009 on
airport charges OJ L 70, 14.3.2009, p. 11.
397. Council Regulation No. 95/93 of 18 January 1993 on common rules for the allocation of
slots at Community airports (OJ L 14, 22.1.1993, as amended by Regulations 894/2002,
1554/2003 and 793/2004.
398. In 2011, the Commission proposed amendments to the Regulation. Thus far, there has been
no agreement See generally DG Comp website:
http://ec.europa.eu/transport/modes/air/airports/slots_en.htm; see ‘Better Airports Package’
December 2011, Press release IP/11/1484. See also Chapter 2 section 2.6.3.4.
399. 98/513/EC: Commission Decision of 11 June 1998 relating to a proceeding under Article 86
of the EC Treaty (IV/35.613 – Alpha Flight Services/Aéroports de Paris. OJ L 230 pp. 10–
27. Decision upheld by General Court. Aéroports de Paris v. Commission Case C-82/01 P.
400. Directive 2009/12 supra.
401. Annual Report on the application of the competition rules in the European Union 1996 p.
142.
402. Commission Press Release IP/97/876, 15 October 1997.
403. Directive 2009/12 supra.
404. United Brands [1978] ECR 207; Commission Decision Scandlines Svergie AB v. Port of
Helsingborg COMP/A.36.568.– a ‘cost-plus approach’ – assessing economic value of a
product/ service by adding to the costs incurred in the provision of this product/service a
reasonable profit which would be a predetermined percentage of the production costs was
rejected.
CHAPTER 8
Mergers and Alliances
8.1 OVERVIEW
8.2 MERGERS
8.2.2.1 Control
Turnover is calculated in accordance with Article 5(1) of the EUMR and the
Commission Consolidated Jurisdictional Notice.427 In airline mergers, three
methodologies are accepted by the Commission for calculation of turnover,
namely, the Point of Sale methodology, whereby turnover is allocated to the
country where the ticket was sold, the Point of Departure methodology,
whereby turnover is allocated to the country from which the passenger
departed, and the 50/50 methodology whereby turnover on each route is
allocated on a 50/50 basis to the country of origin and country of final
destination.428 In the case of the Point of Departure approach, the
Commission has stated that it will determine whether the entire turnover
from round trip journeys should be allocated to the point of departure, as
opposed to a 50/50 split, on a case-by-case basis. Where both parties sell
point to point as opposed to bundled round trip tickets, it decided that it was
appropriate to split turnover equally between the territories of origin and
departure.429 The location of the customer approach is increasingly difficult
to apply in practice, with the increase in online sales.430
8.3 ALLIANCES
The term ‘alliance’ in this chapter refers to joint ventures to develop joint
networks with coordination on prices, capacity and schedules, and merger-
like integration comprising revenue and cost sharing. The term ‘alliance’ is
also commonly used to describe the three Global Alliances (oneworld,
SkyTeam, Star) established in the late 1990s, within which a wider variety
of lower degrees of cooperation take place between alliance members.
The most common forms of cooperation, and listed in the order of
intensity of cooperation and likelihood of competition issues arising,
include low level cooperation such as: interlining, whereby an airline can
issue tickets including a segment that it operates itself, as well as a segment
operated by the another airline, with the party(ies) who operate the segment
charging the issuing airline for the segment that they operate – the
passenger using a single ticket for a journey, with two or more flight legs
and different carriers, without having to collect luggage or check in at the
transit airport(s); sharing of frequent flyer programmes (FFPs) – loyalty
programmes offered by airlines under which customers enrolled in the
programme accrue points for travel on that airline that can be redeemed for
free air travel and increased benefits, such as airport lounge access, priority
bookings and now increasingly wide benefits such as hotel accommodation
and other benefits; and airport arrangements such as lounge access and
ticketing.
Intermediate forms of cooperation include blocked space CSAs
(where one carrier purchases a number of seats on another carrier’s services
and bears the risk of not selling them), then free flow CSAs, where one
airline can freely sell seats on another’s services. CSAs are discussed in
Chapter 5 section 5.3.2.
High-level merger-like cooperation is discussed in the sections below.
Alliances are more common in air transport than in other sectors, often
being used as a ‘second best’ means of achieving close integration similar
to mergers and thus avoiding regulatory barriers to cross-border mergers.
The European Commission – US DoT report of November 2010 stated:
‘This form of cooperation is effectively a close substitute to a merger
because it typically involves full coordination of the major airline functions
on the affected routes, including scheduling, pricing, revenue management,
marketing and sales.’445 Before the ‘Open Skies’ judgment of the Court of
Justice in 2002, mergers between airlines in different Member States of the
EU were rare.446 This was because air-traffic rights held by a merging
airline(s) that ceased to be majority owned and controlled by nationals of
the Member State in which it was based, could be lost, due to nationality
clauses in bilateral Air Services Agreements(ASAs) between EU Member
States and third countries requiring that the airline in question be majority
owned and controlled by nationals of the country in question. Following the
‘Open Skies’ case, in many, but not all cases, the nationality clause in third
country ‘ASAs’ was replaced by a ‘Community clause’ whereby any carrier
in the EU would equally benefit from the traffic rights granted to a carrier
based in another Member State under a third country ASA. The Open Skies
case and related issues are discussed in more detail in Chapter 2 section 2.7.
Mergers between EU carriers and carriers based outside the EU,
however, continue to be restricted as a result of national ownership and
control restrictions. In the US, for example, foreign ownership and control
of airlines must not exceed 49 per cent 25 per cent respectively, and in the
EU, non-EU nationals cannot own more than 49.9 per cent of an EU airline
and must not effectively control it.447
8.3.2 Features of Alliances
8.4.1.1 Overview
The Commission has found that charter flights – generally speaking, flights
bundled with a package holiday – do not belong to the same product market
as scheduled/ unbundled flights, on the basis that the final consumer does
not consider unbundled flights and package holidays as substitutable. Most
customers purchasing unbundled flights cite the independence and the
flexibility that unbundled flights offer as the reason for their choice, and
similarly, most customers purchasing charter tickets would not switch to
unbundled flights. The decision to buy either a package tour or an
unbundled flight depends mainly on the specific characteristics of the
product rather than on pure price considerations.471 As regards sales by
charter airlines of flights not bundled with a package holiday, known as ‘dry
seats’, in Ryanair/Aer Lingus it was left open by the Commission whether
such sales could exercise any competitive constraint hence form part of the
relevant market, as it would not change the competitive assessment.472
The wholesale supply of airline seats to tour operators has also been
viewed as distinct from the market for the supply of scheduled air transport
to end customers and such markets – for wholesale supply of airline seats to
tour operators – have tended to be national in scope, though this has been
left open.473
Other modes of transport, most commonly high speed trains, but also car
and ferry, may form part of the relevant O&D markets for air transport
services on short-haul routes, where they could be regarded as viable
alternatives by customers, in terms of price, frequency, and aggregate travel
time. This has been found to be the case with rail services by Eurostar
between London and Brussels, which have been found to be substitutable
with air services for all passengers, given the comparable aggregate travel
times between city centres, frequencies and prices.493 The O&D pair was
thus broader than the direct air services and included rail transport.
In cases where the duration of travel is greater, and the frequencies
less, rail has been found not to be substitutable. This was the case with rail
transport between Zurich and Frankfurt where the shortest train travel time
of almost 4 hours as compared with flight travel time of almost 3 hours was
found to be substitutable for non-time-sensitive (leisure) passengers but the
extra hour travel distance in each direction, as well as the lower number of
daily frequencies (less than half), such that a typical business return trip
with the same day, would not be possible, meant that for time-sensitive
passengers, it was not substitutable.494
Ferry services have only exceptionally been found to be substitutable
with air services. In Olympic/Aegean the Commission found that for
passengers (including time-sensitive), ferry services between Athens and
Mykonos formed part of the relevant market, on the basis that they were so
close that the total travel time was comparable, as was the frequency of
crossings. Services to other islands were not substitutable for time-sensitive
passengers and it was left open whether other ferry services were
substitutable for non-time-sensitive passengers, as it would not alter the
assessment of the transaction.495
With respect to air cargo transport markets, the O&D approach to market
definition is inappropriate, given that cargo is generally less time sensitive
than passengers, and is usually transported by different means of transport
‘behind’ and ‘beyond’ the origin and destination points. Accordingly, the
relevant geographic market has been defined more broadly to be European-
wide and, for intra-European cargo transport, would include alternative
modes of transport, notably road and train transport, and to a lesser extent
sea freight.496 Further, given cargo may be routed with a higher number of
stopovers, any indirect route is substitutable with any direct route.497
As regards intercontinental routes, the Commission has found that the
corresponding catchment areas broadly correspond to continents, at least for
those continents where adequate transport infrastructure allows onward
connections (for instance by train, truck, inland waterways, etc.), such as
Europe and North America.498 For continents where local infrastructure is
less developed, such as Africa, Asia and the Middle East, these catchment
areas would be considered on a country by country basis, air cargo transport
from Europe towards Africa, Asia and Middle East being assessed on
continent (Europe) to country basis (the respective countries in Asia and
Middle East).499 Air cargo transport markets are also inherently
unidirectional as the demand at each end of the route differs substantially,
so they must be assessed on a unidirectional basis.500
As regards differentiation by reference to types of transported goods
(e.g., dangerous or perishable goods), this will generally not be appropriate,
save in respect, potentially, of certain products which may require a specific
type of carrier, such as oversized cargo or dangerous goods which could not
be transported by carriers transporting passengers, due to physical or legal
constraints.501 Such services are, therefore, more likely to be provided by
carriers operating full freight aircrafts. It has been found, however, that
extremely time-sensitive products (such as perishable goods) would require
a high number of frequencies and a better inter-connectivity, which
normally only combination airlines (i.e., airlines combining the services of
passengers and cargo) could guarantee.502 The transport of smaller parcels,
(grouped by speed of delivery, domestic/international, and quality of service
(such as reliability, security, late pick up time, comprehensive track-and-
trace ability), has also been found by the Commission to be a separate
market in UPS/TNT.503
There is a difference in the legal test for the assessment of mergers and
alliances in that, in the case of mergers, the Commission investigates
whether the merger could significantly impede competition, particularly as
a result of the creation or strengthening of a dominant position,504 whereas
in the case of alliances under Article 101, the Commission investigates
whether the alliance results or is likely to result in the prevention or
distortion of competition, and if so, whether the restrictions are justified by
efficiencies and consumer benefits under Article 101(3). In practice, the
principles applied in the competition assessment and remedies required to
address competition concerns in the case of mergers and alliances, are very
similar.
Competition will, of course, be eliminated between the parties to a
merger. Alliances where the parties cooperate on key parameters of
competition such as price, capacity and sharing of revenue, will similarly
eliminate competition between the parties. The Commission views such
cooperation as by its very nature, harmful to the proper functioning of
competition and therefore restrictive ‘by object’ and, therefore,
automatically caught by Article 101(1) (see Chapter 4 Elements of Article
101 TFEU, section 4.5). Exemption under Article 101(3) is nevertheless
possible and the Commission examines the effects, focusing its attention on
the routes where there is a high probability that the conditions of Article
101(3) would not be met.505 As with mergers, commitments may be agreed
to address serious competition concerns.
In the BA/AA/IB joint venture (oneworld members) and other joint
ventures, including within the other two Global alliances (Star and
SkyTeam), the parties jointly established fares, regulated capacity,
coordinated their respective schedules, cooperated with respect to sales and
marketing, shared revenues and sold each other’s services, without regard to
which party was operating the aircraft. They would, therefore, behave to a
large extent, as a single entity on the routes covered by the joint venture,
with competition being eliminated between them on markets where these
airlines would otherwise compete.506 Alliances where incentives between
the airlines are aligned such that it will be neutral to each carrier whether
tickets are sold on its airline or partner airlines, are known as ‘metal
neutral’.
In cases where the parties or merged entry would have high market shares
on overlapping routes, competition concerns will be the most serious on
routes where there are barriers to entry by airlines who may wish to
commence services on a particular route, and thereby exercise a competitive
constraint on the parties. These concerns relate to slot availability, the
presence of strong parties at airports, entry costs and regulatory factors.
These are discussed in the following sections:
Lack of available slots (the right to take-off and land at an airport) is the
most frequent barrier to entry in airline transport cases, given that slots are
required for a competitor to enter, or expand services on, a route. The
timing of slots will also be an issue, lack of slots during peak times being a
serious entry barrier to potential entrants targeting time-sensitive (business)
customers.521
Lack of slots will be more serious where the airports at both ends are
congested. In BA/AA/IB, the Commission found that already high shares of
the parties (exceeding 50 per cent) were protected by high barriers to entry,
in particular the lack of slots at London and New York airports. In
KLM/Alitalia, this was the case with Schiphol and Malpensa on the
Amsterdam – Milan route. Although slots were available at secondary
airports like Rotterdam or Orio al Serio, these airports were less attractive
for new entry.522 Whether other airports may be viewed as substitutable is
considered within the assessment of market definition (discussed in section
8.4.1 above).
8.4.2.8 Efficiencies
The test for proving efficiencies is high and parties may not always submit
efficiency arguments. In the case of mergers, according to the Horizontal
Merger Guidelines, efficiencies must be verifiable, merger-specific and pass
on benefits to consumers. As regards verifiability, the Commission must be
reasonably certain that the efficiencies are likely to materialise, and be
substantial enough to counteract a merger’s potential harm to consumers.
Efficiencies must also be merger-specific – a direct consequence of the
notified merger and they cannot be achieved to a similar extent by less
anticompetitive alternatives. Efficiencies also have to benefit consumers –
but if there is little competitive pressure on the parties, there will be little
incentive on the part of the merged entity to pass efficiency gains on to
consumers.537 In the case of a merger leading to a market position
approaching that of a monopoly, the Commission guidelines provide that it
is highly unlikely that efficiency gains would be sufficient to counteract its
potential anticompetitive effects.538
Similarly, in the case of alliances caught by Article 101(1), the
burden will be on the parties to demonstrate that the four cumulative criteria
of Article 10(3) are met. In summary, they are: (i) the agreement must
create efficiencies, (ii) the restrictions imposed by this agreement must be
indispensable to the creation of these efficiencies, (iii) consumers must
receive a fair share of these efficiencies, and (iv) the agreement must not
create the possibility to eliminate competition in respect of a substantial part
of the market. These are discussed in greater detail in Chapter 4 section
4.7.539
8.6 COMMITMENTS
The EUMR and Regulation 1/2003 (in the case of alliances) enable
commitments to be accepted by the Commission as a condition of
approving a merger or allowing an alliance to proceed.549 The Commission
must be satisfied that commitments will eliminate the competition concerns
entirely and will be capable of being implemented effectively within a short
period.550 Further, the principle of proportionality requires that
commitments must be suitable and not exceed what is appropriate and
necessary for attaining the objective pursued, so they must not, for example,
disproportionately disrupt the parties’ operations.551
Unlike other industry sectors, very high market shares in O&D
markets have been accepted by the Commission in mergers and alliances
between airlines given their network benefits, but commitments are
required. Generally, the aim of commitments is to ensure that competitive
market structures are preserved. EU competition law, therefore, has a
preference for structural commitments, such as commitments to divest a
business unit as opposed to behavioural commitments which require
monitoring.552
Where commitments are given, the decision provides for the appointment
by the merged entity/parties of a monitoring trustee who has the duty to
monitor the parties’ compliance with the commitments. The monitoring
trustee is appointed by the parties, but independent from the parties and
subject to Commission approval.
405. Commission Report on Competition Policy 2015 (COM (2016) 393 final) 15 June 2016 p.
73.
406. Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations
between undertakings OJ 2004 L 24/1).
407. EUMR Recital 20.
408. Council Regulation (EEC) No. 4064/89 of 21 December 1989 on the control of
concentrations between undertakings OJ L 395 of 30 December 1989, now replaced by
Regulation 139/2004.
409. Commission Consolidated Jurisdictional Notice, 2008 OJ C95/1, para. 12; EUMR Recital
20.
410. EUMR Article 3(1) in combination with 3(4).
411. EUMR Article 3(2); Commission Consolidated Jurisdictional Notice under Council
Regulation (EC) No. 139/2004 on the control of concentrations between undertakings, OJ
2008 C 95/1 (‘Consolidated Jurisdictional Notice’) para. 16.
412. Consolidated Jurisdictional Notice para. 65.
413. Ibid., paras 56 and 58.
414. Ibid., paras 62, 63.
415. Ibid., paras 67–68.
416. In Singapore Airlines/Virgin Atlantic, the Commission found that although the Virgin Group
controlled a majority of shares in Virgin and nominated the majority of the members on the
board, Singapore Airlines had joint control of Virgin through its veto rights and procedure
cases of disagreement over strategic business decisions. (COMP/M.1855 Singapore
Airlines/Virgin Atlantic; see also Case No. COMP/M.6828 – Delta Air Lines/Virgin
Group/Virgin Atlantic; Alitalia/Etihad supra. In Case No. COMP/M.1626 – Sair
Group/SAA, 20 percent was sufficient to establish joint control.
417. EUMR Article 3(4).
418. Consolidated Jurisdictional Notice para. 94.
419. Commission Decision Case No. COMP/JV.19, KLM/Alitalia of 11 August 1999.
420. See most recently the transatlantic joint venture agreement (‘SkyTeam alliance’) in
Commission Decision Case AT.39964 – Air France/KLM/Alitalia/Delta, 12 May 2015.
421. Ryanair/Aer Lingus I Case No. COMP/M.4439.
422. Case T-411/07, Aer Lingus Group v. Commission Case T-411/07 Aer Lingus Group plc v.
Commission [2010] ECR II-3691; see also Case T-411/07 R, unsuccessful application for
interim measures to prevent Ryanair exercising voting rights.
423. Decision 28 Aug 2013 confirmed on appeal by the English Court of Appeal, Ryanair v.
CMA [2015] EWCA Civ 83.
424. White Paper: Towards more effective EU merger control, COM/2014/0449 final (July
2014).
425. EUMR Article 1.
426. EUMR Recital 10, Article 5; Consolidated Jurisdictional Notice 129–131.
427. Consolidated Jurisdictional Notice supra, paras 196–198).
428. Swissair/Sabena II M.616 and subsequent cases.
429. Ryanair/Aer Lingus M.4439 paras 28–29.
430. In IAG/Aer Lingus, Aer Lingus only used the Point of Departure and the 50/50
methodologies as it proved very difficult for it to accurately calculate its turnover under the
Point of Sale methodology due to the vast majority of Aer Lingus’ sales being made online.
The thresholds were met whatever methodology was used. IAG/Aer Lingus Case No.
M.7541 para. 12.
431. EUMR Article 7.
432. Article 4(2).
433. Commission Regulation 802/2004 of 21 April 2004 implementing Council Regulation (EC)
No. 139/2004 on the control of concentrations between undertakings OJ L 133/1, as
amended (available in consolidated form on the DGCOMP website.)
434. Regulation 802/2004, supra Article 6(3); see also section on ‘Market Definition’ below.
435. Commission Notice of 5 December 2013 on a simplified procedure for treatment of certain
concentrations under Council Regulation (EC) No. 139/2004, OJ C366/5.
436. Commission Implementing Regulation (EU) No. 1269/2013, 2013 OJ L 336/1. The
information required to notify a merger has been reduced following amendments to the
Implementing Regulation 802/2004 as part of a ‘Simplification Package’ introduced with
effect from 1 January 2014 also making it simpler for the merging companies to ask the
Commission to waive their obligation to provide certain information in their notification and
to request a referral of a case from the Commission to a Member State or vice versa has also
been reduced – see also Commission Press Release IP/13/1214 5 December 2013.
437. EUMR Arts Arts 9, 4(4)
438. EUMR Art 22; Case No. COMP/M.6796 – Aegean/Olympic II, 9 October 2013. The
EUMR thresholds had been met in the Aegean/Olympic I merger notification, prohibited in
Case No. COMP/M.5830 – Olympic/Aegean Airlines I, 26 January 2011.
439. EUMR Article 4(5).
440. EUMR Article 2(3).
441. See section 8.5 below.
442. EUMR Article 6(1)(c).
443. Examples of Phase II decisions in the air transport sector are Lufthansa/Austrian Airlines,
CASE COMP/M.5440 – 31 July 2009 a clearance decision with commitments and
prohibition decisions in Aegean/Olympic I supra, Ryanair/Aer Lingus I and III, supra.
444. Other decisions, which have not arisen in the air transport sector are: Article 8(4) –
dissolution of the merger in case of premature implementation or implementation in breach
of a condition for clearance, Article 8(5) – interim measures and Article 8(6) – revocation of
a clearance decision in case of incorrect information or breach of obligation.
445. Transatlantic Airline Alliances: Competitive Issues and Regulatory Approaches, A Report
by the European Commission and the United States Department of Transportation, 16
November 2010 para. 24.
446. ‘Open Skies’ Judgements of the Court of Justice in Case C-466/98 Commission v. United
Kingdom [2002] ECR I-9427; Case C-467/98 Commission v. Denmark [2002] ECR 9519;
Case C-468/98 Commission v. Sweden [2002] ECR 9575; Case C-469/98 Commission v.
Finland [2002] ECR 9627; Case C-471/98 Commission v. Belgium [2002] ECR 9681; Case
C-472/98 Commission v. Luxemburg [2002] ECR 9741; Case C-475/98 Commission v.
Austria [2002] ECR 9797; Case C-476/98 Commission v. Germany [2002] ECR 9855. See
Chapter 2.
447. 49 U.S. Code § 40102 15C; Council Regulation 1008/2008 of 24 September 2008 on
common rules for the operation of air services in the Community (Recast) OJ L 293/3,
Article 4(f). See generally Chapter 2.
448. An example of an alliance which terminated is Delta/Swissair/Singapore Airlines.
449. Aer Lingus exited the one world Alliance in 2007, and was later acquired by IAG, a
member of one world.
450. Examples of exemption decisions following notifications in the air transport sector under
the then regime of Regulation 3975/87 OJ L 374/1 (Regulation 3975/87 is discussed in
Chapter 2) include COMP/37.730 — Lufthansa/Austrian Airlines, 5 July 2002; CASE
COMP/A.38.477/D2: British Airways/SN Brussels Airlines) 10 March 2003, CASE
COMP/D2/38.479: British Airways/Iberia/GB Airways, 10 December 2003; Case
COMP/38.284/D2 Société Air France/ Alitalia Linee Aeree Italiane S.p.A. 7 April 2004.
451. Council Regulation 1/2003 of 16 December 2002 on the implementation of the rules on
competition laid down in Articles 81 and 82 of the Treaty OJ 2003 L 1/1. Enforcement and
Regulation 1/2003 generally is discussed in Chapter 9.
452. Regulation 1/2003, Article 9(1); joint ventures within the three Global Alliances are
Commission Decisions in Case COMP/39.596 – British Airways, American Airlines, Iberia
of 14 July 2010; CASE COMP/AT.39595 – Continental/United/Lufthansa/Air Canada of 23
May 2013; and CASE AT.39964 – Air France/KLM/Alitalia/Delta of 12 May 2015.
453. Regulation 1/2003, Article 27(4).
454. These limited powers were under the ‘transitional regime’ that applied to the air transport
sector then Articles 88 and 89 EEC Treaty (now, as amended, Articles 104 and 105 TFEU,
discussed at Chapter 2). This limitation was acknowledged by the Commission in the
Airfreight cartel decision (CASE AT.39258 – Airfreight, 09/11/2010; provisional non-
confidential version, published on 08.05.2015, in which no fines were imposed in respect of
alleged cartel activity on EU-third country routes prior to 1 May 2004 (see generally
Chapter 5.2.4 above).
455. See summary in Commission Memo 10/330, 14 July 2010.
456. Council Regulation 411/2004 of 26 February 2004 repealing Regulation 3975/87 and
amending Regulations 3976/87 and 1/2003, in connection with air transport between the
Community and third countries (OJ 2004 L 68/1.)
457. Case 66/86 Ahmed Saeed Flugreisen and Others [1989] ECR 803, paras 39–41.
458. Cases of the ECJ confirming the conformity of the O&D approach with the EU principles of
market definition include Air France v. Commission, easyJet v. Commission and T-162/10 –
Niki Luftfahrt GmbH v. European Commission, paras 140 and following.
459. Ryanair/Aer Lingus I para. 63.
460. Commission Notice on the Definition of the Relevant Market for the purposes of
Community law 1997 OJ C 372/3.
461. Case T-162/10 Niki Luftfahrt GmbH v. Commission paras 140 et seq.
462. European Commission, Case COMP/M.3280 – Air France/KLM, 11.02.2004, para11 et seq.
463. European Commission Case COMP/39.596 – BA/AA/IB para. 18.
464. Air France/KLM supra para. 17.
465. Case No. COMP/M.4439 – Ryanair/Aer Lingus paras 59 – 66.
466. Commission Decision of 11.08.1999, in Case No. COMP/JV.19, KLM/Alitalia, para. 21.
Case No. M.7333 – Alitalia/Etihad, paras 70 and following; Case No. M.7270 – Cesky
Aeroholding/ Travel Service/Ceske Aerolinie, para. 20 and following; Case No. M.6663 –
Ryanair/Aer Lingus III, para. 382; Case No. M.6607 – US Airways/American Airlines, para.
8; Case No. M.6447 – IAG/bmi, para. 36; Case No. M.6607 – US Airways/American
Airlines, para. 8.
467. See Nikki Luffhart paras 18 – 22.
468. SkyTeam alliance, Commission Decision Case AT.39964 – Air France/KLM/Alitalia/Delta,
12 May 2015. KLM/Martinair M.5141.
469. Case No. M.7541 IAG/Aer Lingus, paras 22 – 24.
470. Ibid., paras 25 – 28, referring also to the ‘Business Plus’ offering of Ryanair.
471. Case No. COMP/M.5141-KLM/Martinair, para. 120.
472. Ryanair/Aer Lingus I paras 300–310.
473. Case No. COMP/M.5440-Lufthansa/Austrian Airlines paras 34–35 – it was left open
whether Germany and Austria were a single geographic market due to lack of language
barriers, similar customer preferences and minimal price differences between Austria and
Germany.
474. Non-stop/one-stop terminology is also used. ‘Non-stop’ flights are flights that take-off at
airport A and land at airport B where they load off passengers without any stops in between.
By contrast, ‘direct’ flights may entail a refuelling stop and/or a disembarking/re-embarking
stop, but are marketed under a single flight code and are flown with a single aircraft. ‘One-
stop’ flights include direct flights that do not qualify as ‘non-stop’, as well as indirect flights
which are journeys that require a change of aircraft or a change of flight code (see for
example IAG/Aer Lingus, supra, para. 30).
475. IAG/bmi para. 68.
476. Case No. COMP/M.5403 – Lufthansa/BMI para. 17 Air France/KLM para. 20; Commission
Decision of 12 January 2001 in Case No. COMP/M.2041 – United/US Airways, and
Commission Decision of 5 March 2002 in Case No. COMP/M.2672 – SAS/Spanair, OJ C
93,18.4.2002, p. 7.
477. See generally Case No. COMP/M.5335 – Lufthansa/SN paras 37–46; Ar France/KLM para.
80 – on the city pairs Bordeaux to Amsterdam and Marseille to Amsterdam, the shares of
market of Air France’s indirect service (via Paris) indicated that these were a constraint to
direct flights.
478. Case No. COMP/M.5440-LUFTHANSA/AUSTRIAN AIRLINES para. 26; Case No.
COMP/ M.5335 – Lufthansa/SN Airholding, para. 45 [date].
479. Case No. COMP/M.5403 – LUFTHANSA/BMI para. 16.
480. Ibid., paras 47–50; Case No. COMP/M.3280 –Air France/KLM para. 22.
481. IAG/Aer Lingus, supra, para. 47.
482. Ryanair/Aer Lingus I, supra para. 73.
483. Case No. COMP/M.3280 – Air France/KLM para. 24.
484. Ibid., para. 25.
485. Case No. COMP/M.4439 – Ryanair/Aer Lingus para. 196.
486. See case COMP/M.3280 – Air France/KLM, paras 24–35.
487. Case No. COMP/M.5335-Lufthansa/SN Airholding para. 60.
488. Case No. M.7541 – IAG/Aer Lingus paras 257–259.
489. Case No. COMP/M.5747 – Iberia/British Airways paras 21–23.
490. Case No. COMP/M.3280 – Air France/KLM para. 29.
491. IAG/Aer Lingus supra, para. 58.
492. Air France/KLM supra para. 26.
493. CASE COMP/A.38.477/D2 British Airways/SN Brussels Airways 10 March 2003 para. 19.
494. Lufthansa/Swiss supra paras 56–58. A similar conclusion was reached in Air France/KLM
in relation to rail travel between Paris and Amsterdam where the rail travel journey was 1
hour longer, with six daily frequencies in contrast with 14 operated by the parties paras 70–
71.
495. Olympic/Aegean I and II, supra.
496. Case No. COMP/M.5440-Lufthansa/Austrian Airlines para. 28; Case No. COMP/M.5403 –
Lufthansa/BMI para. 18.
497. Air France/KLM para. 36.
498. See Case No. COMP/M.3280 – Air France/KLM para. 36; Case No. COMP/M.3770 –
Lufthansa/ Swiss.
499. In Case No. COMP/M.5403, based on the market investigation, air cargo from Europe to
Sierra Leone was found to be a separate market see para. 18.
500. Lufthansa/BMI supra para. 19.
501. Air France/KLM para. 37.
502. Ibid.
503. Commission Decision M.6570 – UPS/TNT 30 Jan 2013 – annulled on appeal Case T-194/13
United Parcel Service v. Commission, 7 March 2017.
504. EUMR Article 2(3).
505. See for example, SkyTeam alliance 2015 para. 42; similar assessments were made in
BA/AA/IB and the A++ JV.
506. BA/AA/IB supra paras 32, 33, 37; A+ + JV and SkyTeam alliance.
507. Joined c/ases T-374/94 et ors, European Night Services, [1998] ECR II-3141, para. 137.
508. Air France/KLM, supra, upheld on appeal by General Court, Case T-177/04, easyJet Airline
Co. Ltd v. Commission ECR [2006] II – 1931.
509. Case No. COMP/M.5747 – Iberia/British Airways 14 July 2010.
510. Ryanair/Aer Lingus I supra, paras 57, 59, 71; market shares and number of overlaps had
increased from over 30 to over 40 from the first to the second Ryanair/Aer Lingus decision
(III).
511. Ibid., s. 7.3.
512. Case No. COMP/M.5747 – Iberia/British Airways para. 55; COMP/M.5440
Lufthansa/Austrian Airlines, COMP/M.5335 Lufthansa/SN. Cooperation within such
alliances may include areas such as combined ticket offices, check-in facilities, lounges,
boarding experience, cabin crew, meals, seat comfort, punctuality, in-flight entertainment,
aircraft cleanliness and baggage handling. Some members may also code-share with each
other on certain routes and cooperate in relation to Frequent Flyer Programmes.
513. COMP/M.6607 US Airways/American Airlines 5 August 2013.
514. Ibid. Commitments were, there, required. On other transatlantic routes affected by the
merger the merged entity would face competition from other metal neutral joint ventures
such as the SkyTeam alliance including Delta, Air France/KLM and Alitalia, and the A++
joint venture comprising Lufthansa, Air Canada and United Airlines.
515. United/US Airways supra.
516. Air France/KLM para. 65.
517. Guidelines on the assessment of horizontal mergers under the Council Regulation on the
control of concentrations between undertakings (‘Horizontal Merger Guidelines’), OJ C
31/5, para. 9.)
518. Case No. COMP/M.5747 – Iberia/British Airways 14 July 2010 paras 68, 96.
519. Case No. COMP/M.5889 United Airlines/Continental Airlines 27 July 2010 paras 36–38.
520. Case M.7333 – Alitalia/Etihad.
521. Case No. COMP/M.3770 – Lufthansa/Swiss, supra, para. 33.
522. KLM/Alitalia supra para. 30.
523. SkyTeam alliance paras 54–59; Case COMP/M.5335 Lufthansa/Brussels Airlines, para. 160.
524. Case T-342/07 Ryanair Holdings v. Commission, [2010] ECR II 3457.
525. Case No. M.7270 – Cesky Aeroholding/Travel Service/Ceske Aerolinie,
526. The Slot Regulation 95/93 allows airlines to exchange slots with other airlines, often
exchanging a slot at a valuable time of day for a ‘junk slot’ in late evening or early
afternoon, which is not particularly useful. A proposal for a revised Regulation would
expressly allow airlines to buy and sell slots. Proposal for a regulation of the European
Parliament and of the Council on common rules for the allocation of slots at European
Union airports, /* COM/2011/0827 final – 2011/0391 (COD).
527. case M.3770 – Lufthansa/Swiss, para. 44.
528. Aegean/Olympic I and II; Ryanair/Aer Lingus Section 7.8.4.3.
529. KLM/Alitalia 1999 para. 30.
530. SkyTeam alliance, para. 64.
531. BA/AA/IB supra.
532. IAG/Aer Lingus paras 440–441.
533. Commission Press Release IP/04/194, 11 February 2004.
534. Transatlantic Airline Alliances: Competitive Issues and Regulatory Approaches: A report by
the European Commission and the United States Department of Transportation 16
November 2010, ec.europa.eu/competition/sectors/transport/…/joint_alliance_report.pdf,
paras 43 et seq.
535. Star Alliance A++ para. 64, 67.
536. See OECD Paper on Airline Competition 18–19 June 2014 DAF/COMP(2014)14, para. 98;
Brueckner et al (2014); Gillespie and Richard 2010.
537. Horizontal Merger Guidelines, paras 78–88.
538. Horizontal Merger Guidelines para. 84; see also Ryanair/Aer Lingus I in which there was an
extensive discussion of efficiencies; see also Commission Competition Policy Newsletter
2007 No. 3 p. 65.
539. See also Communication from the Commission – Guidelines on the application of Article
101(3) of the Treaty OJ C 101, 27 April 2004 p. 97, also discussed in Chapter 4.
540. Guidelines on Article 101(3), para. 43).
541. CASE COMP/AT.39595 – Continental/United/Lufthansa/Air Canada Star Alliance 23 May
2013 para. 55 et seq.
542. Ibid., paras 74–78.
543. Horizontal Merger Guidelines, para. 89.
544. The defence has been successfully invoked in Commission merger decisions: Case No.
IV/M.308 Kali + Salz/MDK/Treuhand 14 December 1993; M.2314
BASF/Pantochim/Eurodiol 11 July 2001; and Aegean/Olympic II supra.
545. Case No. COMP/M.6796 – Aegean/Olympic II Decision followed a Phase II investigation;
Commission press release Statement on Aegean/Olympic Air merger 9 October 2013.
546. Case No. COMP/M.6447 IAG/BMI para. 133.
547. COMP/M.6570 UPS/TNT Express 30 January 2013; annulled on appeal Case T-194/13
United Parcel Services v. Commission 7 March 2017.
548. Case M.7630 Fecex / TNT Express 8 January 2016.
549. EUMR Article 6(2), see also Commission Regulation 802/2004 and the Commission
Remedies Notice supra; Regulation 1/2003 Article 9(1.)
550. Remedies Notice para. 9; similar principles apply to alliances commitments under
Regulation 1/2003.
551. easyJet v. Commission, supra para. 133; BA/AA/IB supra.
552. Commission notice on remedies acceptable under Council Regulation (EC) No. 139/2004
and under Commission Regulation (EC) No. 802/2004 OJ C 267, 22.10.2008, p. 1
(‘Remedies Notice’), para. 15.
553. Divestiture of a business including assets and comprising 43 overlap routes to a competitor,
Flybe, was among remedies offered in Ryanair/Aer Lingus III. The Commission, however,
considered the remedy package unlikely to enable Flybe or other carriers to effectively enter
and build a presence on all the overlap routes in the short term or to constrain the merged
entity to a sufficient extent – Ryanair/Aer Lingus III supra, paras 1733 et seq; see also
Aegean/ Olympic I.
554. Remedies Notice para. 61.
555. easyJet v. Commission supra para. 154.
556. Ibid., para. 183.
557. Remedies Notice para. 63 and footnote 69.
558. Case No. COMP/M.3770 Lufthansa/Swiss of 20.8.2005; Commission Decision of 11
February 2004 in Case No. COMP/M.3280 Air France/KLM.
559. IAG/Aer Lingus para. 562; Case No. COMP/M.644 IAG/BMI.
560. BA/AA/IB, London – New York, CASE COMP/AT.39595 –
Continental/United/Lufthansa/Air Canada, Frankfurt – New York).
561. Commission’s Communication COM(2008)227 final on the application of Regulation
(EEC) No. 95/93 on common rules for the allocation of slots at Community airports, as
amended, 30 April 2008, p6; British Airways/American Airlines/Iberia; IAG/Aer Lingus
para. 567.
562. Case No. COMP/M.3770 – Lufthansa/Swiss. These are common in mergers and alliances
and the utilisation period after which grandfather rights are acquired may be longer where
slots are very valuable. See Lufthansa/Austrian supra – Vienna – Frankfurt eight seasons
were required para. 342.
563. CASE COMP/D2/38.479: British Airways/Iberia/GB Airways 10 December 2003.
564. Ryanair/Aer Lingus I para. 381–382; 939; see also Aegean/Olympic were similar issues
arose.
565. Lufthansa/Austrian Phase II clearance, paras 329, 397.
566. Lufthansa/Austrian supra.
567. Case T-101/13 Aer Lingus v. Commission, application dated 14 February 2013 for the
annulment of the decision of the European Commission of 14 November 2012 on the
assessment of the viability of Applicants and evaluation of their formal bids pursuant to
Clause 1.4.9 of the Commitments attached to the Commission Decision of 30 March 2012
declaring a concentration compatible with the common market (Case COMP/M.6447 –
IAG/bmi) following the Monitoring Trustee’s opinion of 29 October 2012 – Summer 2013
IATA Season. See also removal from the register by which the appeal was withdrawn on 21
September 2015.)
568. British Airways/American Airlines/Iberia supra.
569. See for example, Case No. COMP/M.5440-Lufthansa/Austrian Airline; Air France/KLM,
supra.
570. BA/AA/IB supra.
571. BA/AA/IB supra; SkyTeam Alliance supra; Air France/KLM; IAG/Aer Lingus.
572. Skyteam alliance, supra para. 119.
573. Ibid., para. 120.
574. Air France/KLM; IAG/Aer Lingus; BA/AA/IB.
575. SkyTeam JV, supra.
576. Ibid., paras 120.
577. IAG/Aer Lingus, paras 568–583.
578. SkyTeam Alliance; Air France/KLM.
579. KLM supra para. 165; see also Lufthansa/Swiss supra, para. 197.
580. Air France/KLM, supra paras 97–104, 155; see also Lufthansa/Swiss paras 188–189.
581. Lufthansa/Swiss; Air France/KLM.
582. KLM/Alitalia supra.
583. In Faull & Nikpay EU Law of Competition 3rd Edition, it is suggested that the frequency
freeze remedy may not be used by the Commission due to possible negative effects on
airlines’ freedom to respond to market changes and that caution may equally be required
with pricing remedies which may be difficult to apply in practice 15.127–128.
CHAPTER 9
Enforcement of EU Competition Law
9.1 OVERVIEW
9.3.4 Extraterritoriality
Articles 101 and 102 TFEU focus on the effect on competition and trade
within the EU and apply irrespective of where an undertaking is located or
where the agreement has been concluded.604 Since the Wood Pulp case,
transatlantic alliances and the Airfreight cartel more generally, it has been
clear that agreements between non-EU undertakings or between EU and
non-EU undertakings which affect trade within the EU will be caught by
EU competition law.605 This will also be the case with abuse of a dominant
position by an entity outside the EU (see Intel discussed below). The EU
Merger Regulation 139/2004 also applies to mergers where global and EEA
turnover thresholds are met, irrespective of where the merging parties are
based.
It is not clear that the Commission has the power to request
information from companies located outside the EEA. The Commission has
the power to issue requests for information and must copy the NCA of the
Member State ‘in whose territory the seat of the undertaking is situated’.606
The Commission does address requests to undertakings outside the EU, but
does so without mentioning sanctions for failure to respond, unlike with
undertakings located within the EU where sanctions are set out, and the
response of such an undertaking will be a matter for the recipient’s
corporate strategy.607 Jurisdictional difficulties would not arise if the
company has a subsidiary or a branch within the EU, or if there is a bilateral
agreement between the EU and the country in question providing for
cooperation in the field of competition law, as is the case with the US.608
There is also cooperation between competition authorities worldwide within
the International Competition Network. The Commission has also
addressed Statements of Objections and Decisions directly to companies
located outside the EU.609
9.5 COMPLAINTS
9.7 FINES
9.8 APPEALS
584. See also discussion in Chapter 2 of the ECJ Ahmed Saeed case and pre-1/5/2004 limitation
acknowledged by the Commission in the Airfreight cartel decision.
585. Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the
rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 4.1.2003, p. 1.
586. Council Regulation (EC) No. 411/2004 of 26 February 2004 repealing Regulation (EEC)
No. 3975/87 and amending Regulations (EEC) No. 3976/87 and (EC) No. 1/2003, in
connection with air transport between the Community and third countries, OJ L 68, 6 March
2004 p. 1 See Chapter 2.
587. Commission Notice on the cooperation between the Commission and the courts of the EU
Member States in the application of Articles 81 [101] and 82 [102] EC OJ C 101,
27.04.2004, pp. 54–64; Commission Notice on cooperation within the Network of
Competition Authorities OJ C 101, 27.04.2004, pp. 43–53.
588. Articles 11–12 Reg 1/2003.
589. Reg 1/2003, Articles 3,16; ECN Notice supra para. 43.
590. For example, OFT decision 19 April 2012 pursuant to UK law and/or Article 101 imposing
a fine of GBP 58.5 million, reduced from GBP 121 million imposed in August 2007.
591. The Commission investigation of discrimination against Sabre in 1999 followed a request
by the US authorities. See Chapter 7 Abuse of a Dominant Position.
592. Reg 1/2003 Article 25.
593. Regulation 1/203, Article 18.
594. The ECJ annulled Commission RFIs which were excessively vague and imposing a
disproportionate burden on the recipients having regard to the volume of information
requested – Judgments in Cases C-247/14 P et ors Heidelberg Cement v. Commission 10
March 2016.
595. Regulation 1/3003, Article 20.
596. Ibid. Article 21.
597. Ibid. Article 22.
598. Case 374/87 Orkem v. Commission [1989] ECR 3283.
599. Reg 1/2003, Article 20(1)(d).
600. Case C-155/75 AM & S Europe Ltd v. Commission [1982] ECR 1575.
601. Ibid., para. 21, 23. In AM & S, communications made six years prior to the Commission
proceedings were protected.
602. C-550/07 P Akzo Nobel v. Commission [2010] ECR I 8301. The European Parliament also
proposed to recognise in-house privilege within Regulation 1/2003 but this was rejected, EP
document A5-0229/2001.
603. See Kerse & Kahn EU Antitrust Procedure 6th edition, for a detailed discussion.
604. Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty, 2004
OJ C 101/81, para. 100.
605. Case C-85/89, Ahlström osakeyhtiö and others v. Commission (‘Wood Pulp’).
606. According to Article 18(5) of Regulation 1/2003.
607. In Marine Hoses, [2009] OJ C186/6 and Seamless Tubes [2003] OJ L140/1, companies
located outside the EU responded to Commission requests.
608. Decision in US based Intel addressed to Intel, care of its Irish subsidiary. Case
COMP/37/7990.
609. Dyestuffs Joined Cases 48/69 ICI v. Commission [1972] ECR 619; Power Transformers
COMP/39.129.
610. The EU agreements with Canada and US contain such provisions contain cooperation and
positive comity agreements to coordinate enforcement and avoid conflicting decisions. In
practice, this will involve notification to one another of mergers which impact on the other
and consultation at the investigative stages.
611. Article 20 of the EU-US Agreement. Procedures are set out in Annex 2 to the Agreement.
612. See generally Transatlantic Airline Alliances: Competitive Issues and Regulatory
Approaches – A report by the European Commission and the United States Department of
Transportation 16 November 2010; see also Agreement on Air Transport Between Canada
and the European Community and Its Member States Article 14, referring to Agreement
between the Government of Canada and the European Communities regarding the
Application of their Competition Laws 1999.
613. Regulation 1/2003, Article 13(1).
614. Case T-355/13, Judgment of the General Court of 21 January 2015.
615. See generally Commission Regulation 773/2004 relating to the conduct of proceedings by
the Commission pursuant to Articles [101] and [102] of the EC Treaty OJ L 123,
27/04/2004 p. 18.
616. Regulation 1/2003, Article 7.
617. Regulation 1/2003, Article 9.
618. For a discussion of the Commission’s approach to commitments in alliances, see Faull &
Nikpay, 3rd edition, Chapter 15.
619. Between 2008 and 2016, there have been 20 settlement decisions.
620. Commission Regulation (EC) No. 773/2004, relating to the conduct of proceedings by the
European Commission pursuant to Articles 81 and 82 of the EC Treaty, 2004 OJ L 123 p.
18; Commission Notice on the Conduct of settlement procedures in view of the adoption of
decisions under Articles 7 and 23 of Council Regulation (EC) No. 1/2003, 2008 OJ C 167 p.
1.
621. The first hybrid decision was Commission Decision C(2010) 5001 final – Case
COMP/38866—Animal feed phosphates; upheld by the EU General Court in Case T-456/10
Judgment of the General Court of 20 May 2015 — Timab Industries and CFPR v.
Commission, OJ C 221, 6 July 2015, pp. 6–7.
622. See ‘Fines’ below.
623. Jail sentences were imposed on individuals in the case of investigations of the Airfreight
cartel in the US and Australia.
624. Reg 1/2003 Article 23(1), Article 24(2).
625. Ibid., Article 23(3).
626. Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a)
of Regulation (EC) No. 1/2003, OJ 2006 C 210 p. 2, which have led to increased fines. In
the Airfreight cartel decision, fines in respect of routes between the EEA and third countries
were reduced by 50 per cent on the basis that part of the harm on such routes was likely to
fall outside the EEA, by 15 per cent on the basis that carriers were encouraged to concert on
prices on certain routes under bilateral Air Services Agreements with third countries, and an
uplift for recidivism was imposed on SAS (see Chapter 5 for discussion of the Decision,
which was annulled.)
627. T-286/09 – Intel v. Commission 12 June 2014, appeal pending before the ECJ C-413/14 P.
628. Commission press release IP/16/2582 19 July 2016. The Commission published statistics on
fines, available on its website: http://ec.europa.eu/competition/cartels/statistics/statistics.pdf.
629. Case T-39/07, Eni SpA v. European Commission.
630. Ibid., see also Case T-112/05, Akzo Nobel NV v. Commission [2007] ECR II 5049, para.
62.
631. C-499/11 P, upholding Case T-42/07 Dow Chemical and Others v. Commission [2011] ECR
II-4531, upholding Commission Decision of 29 November 2006 relating to a proceeding
under Article 101, Case COMP/F/38.638 – Butadiene Rubber. The decision refers to
parental liability for fines, but states that whether group companies form part of the same
‘undertaking’ or are separate ‘undertakings’ for the purposes of deciding if there is an
‘agreement’ within the meaning of Article 101(1) may be different.
632. Commission Decision National Panasonic [1982] OJ L354/28.
633. Case C-501/11 P Schindler Holdings v. Commission REF – the Court upheld the decision
not to offer a reduction of a fine for participation in a cartel which nevertheless took place,
para. 142.
634. See also Wouter Wils: ‘Antitrust compliance programmes and optimal antitrust
enforcement; Journal of Antitrust Enforcement, Vol. 1, No. 1 (2013) pp. 52–81. Guidance
on compliance programmes is available on the Commission’s website:
http://ec.europa.eu/competition/antitrust/compliance/index_en.html).
635. The General Court upheld appeals brought by addresses of the Airfreight decision,
discussed in Chapter cartels.
636. Case C-453/99, Courage v. Crehan ECR [2001] I-6297, para. 26.
637. Regulation 1/2003, Article 16.
638. The preferred forums for the bringing of actions for breach of competition law in the EU
tend to be Germany, the Netherlands and the UK. In each of these countries, actions were
brought by claimants against airlines fined by the Commission in the Airfreight cartel
decision.
639. Regulation 44/2001 Council Regulation of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters, as amended –
see http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:02001R0044-
20150110&rid=1; see Case C-302/13 flyLAL-Lithuanian Airlines v. Starptautiskā lidosta
Rīga VAS And Air Baltic Corporation AS, 23 October 2014.
640. Green Paper – Damages actions for breach of the EC antitrust rules (SEC(2005) 1732)
COM/2005/0672 final.
641. Directive 2014/104/EU on certain rules governing actions for damages under national law
for infringements of the competition law provisions of the Member States and of the
European Union, OJ L 349, 5.12.2014, pp. 1–19.
642. The Commission has also issued a Recommendation urging Member States to introduce
mechanisms for injunctive and compensatory collective redress OJ L 201, 26.7.2013, pp.
60–65, Guidance on quantifying harm in damages actions for breach of Articles 101 and
102 (OJ 2013 C 167 p. 7, and has stated that Guidelines for national courts on the passing
on of overcharges will also be issued.) The Directive had to be implemented in Member
States’ national laws by 27 December 2016.
CHAPTER 10
EU State Aid Rules
10.1 OVERVIEW
Articles 107–109 TFEU lay down the principles for the control of State aids
in order to prevent the distortion of competition by State subsidies and other
aids. The Commission has sole competence to determine whether aid
breaches Article 107 and can order governments to recover aid that has
been illegally granted. Aid must generally be pre-notified to the
Commission for approval and national courts have power to declare
unnotified aid unlawful under Article 108(3). Articles 107 and 108 have
been implemented by Regulations,643 the Decision 2012/21 on services of a
general economic interest 644 and are the subject of three sets of Guidelines,
namely the Rescue and Restructuring Guidelines 2014,645 the Aviation
Guidelines 2014646 and the Commission Notice on the notion of State aid
2016.647
In the air transport sector, aid was traditionally granted in the years
following liberalisation from the early 1990s onwards by Governments to
their flag carrier airlines, notably in the form of restructuring aid, with some
substantial capital injections being authorised, though in more recent years
aid has also been granted by publicly owned airports in the form of
reductions in airport charges and other grants granted by airports to low-
cost airlines on start-up routes.
The EU State aid principles – the notion of ‘aid’, the conditions for
aid to be compatible with the internal market – and enforcement by the
Commission and national courts are discussed below. A final section
discusses third country subsidies to airlines where rules are limited in their
scope and have never been applied in practice.
Aid may take a wide variety of forms, which include direct grants, loans on
preferential terms, State guarantees and the making of investments, such as
the taking on of shareholdings in companies which may be experiencing
financial difficulties. It may also include measures which mitigate charges
which would normally be payable, and thus similar in character to
subsidies, such as preferential tax treatment654 or the provision of airport
services to airlines at discounted rates.655 Misuse of aid, for example, aid
authorised for the provision of infrastructure then being used for the benefit
of a single or specific undertakings, may also constitute aid.656 The
determining factor is whether the recipient receives a benefit which it could
not obtain under normal market conditions.657 This is discussed in the
following section.
Under the EU State aid rules, there is no requirement, as is the case with
Articles 101 and 102 TFEU, that the effect on trade between Member States
be appreciable. Further, as regards aid that is purely local, the Court has
held that that it is not impossible that a public subsidy granted to an
undertaking which provides only local or regional transport services and
does not provide any transport services outside its State of origin, may
nonetheless have an effect on trade between Member States. This is because
the supply of transport services by that undertaking may, therefore, be
maintained or increased, with the result that undertakings established in
other Member States have less chance of providing transport services in the
market in that Member State.662
In the case of small airports that predominately serve local users and
for which the impact on cross-border investment is marginal, Commission
Guidelines on the notion of aid state that such aid is unlikely to have an
effect on trade between Member States.663 Where there is competition with
another airport, however, this can give the subsidised project a selective
economic advantage over its rivals and is, therefore, likely to fall within the
State aid rules.
The Court has held that when State aid strengthens the position of an
undertaking compared with other undertakings competing in intra-EU trade,
the latter must be regarded as affected by that aid.671 It is, therefore,
sufficient that the recipient of the aid competes with other undertakings on
markets which are open to competition.672
Aid was authorised under this ground in the form of emergency aid
by Member States to airlines for a limited period following the September
2001 terrorist attacks – to compensate for the costs to airlines of American
airspace being closed for four days and to help airlines meet the extra costs
of insurance.677 Schemes had to be notified to the Commission to
demonstrate that that the amounts granted did not exceed the losses.
Operating aid – aid to cover operating costs – can only be authorised under
exceptional circumstances. The Commission considers that airports and
airlines should normally bear their own operating costs. Examples of types
of permissible aid which may include operating aid are aid of a social
character (section 10.3.1.1 above), aid for start-up airlines (section 10.3.2.3
below), certain aid to airports which have been granted a temporary
derogation from the prohibition of operating aid for a period of 10 years
(section (4) below) and aid to fund services of a general economic interest
(section 10.3.2.5 below).
10.3.2.2 Rescue and Restructuring Aid
The Aviation Guidelines now lay down principles for the assessment of
such aid, replacing those set out in the 2005 Guidelines, and these have
been applied in the assessment of a number of cases. To determine whether
arrangements involve State aid, the market economy operator test applies,
with it having to be demonstrated that the revenue from the airline’s
operations (airport charges and non-aeronautical revenues) at the airport
will cover the costs of the arrangements with the airline, with a reasonable
profit margin. Where arrangements involve aid, the Guidelines provide that
start-up aid will be permitted where it increases the connectivity of the
regions by opening new routes, or facilitates regional development of
remote regions. If there is a high-speed rail link on the route in question or
services from another airport in the same catchment area, set at around 100
kilometres or around 60 minutes travelling time by car, bus, train or high-
speed train from the airport in question, this will not be the case.719
Airlines operating at airports with fewer than 3 million passengers
per year may receive start-up aid for three years following the launching of
a new route. Aid for airports serving 3–5 million passengers will only
exceptionally be considered compatible with the internal market. Start-up
aid for routes in a remote region may be permitted irrespective of the size of
the airport concerned, however. The aid may cover up to 50 per cent of the
airport charges and should be allocated on a non-discriminatory basis.720
As regards notification, the Commission encourages Member States
to notify national schemes rather than individual airport measures, with the
exception of airports of 3–5 million passengers not located in remote areas,
which must be notified individually.721
(i) the project is necessary for the provision of services that can be
considered as genuine services of general economic interest
(SGEI) for which the public service obligations (PSO) have been
clearly defined. As regards air transport services, a PSO can
only be imposed under Regulation 1008/2008736 and only in
respect of a route where transport needs cannot be fulfilled by an
existing air route or other means of transport. Article 16(1)
provides that a Member State may impose a PSO ‘in respect of
scheduled air services between an airport in the EU and an
airport serving a peripheral or development region in its territory
or on a thin route to any airport on its territory any such route
being considered vital for the economic and social development
of the region which the airport serves.’737 As regards airports,
this would be possible if the area to be served (such as islands or
peripheral regions) would otherwise be isolated to an extent that
it would prejudice its social and economic development.738
(ii) the parameters of compensation have been established in
advance in an objective and transparent manner;
(iii) there is no compensation paid beyond the net costs of providing
the public service and a reasonable profit;739 and
(iv) the SGEI have been either assigned through a public
procurement procedure that ensures the provision of the service
at the least cost to the community or the compensation does not
exceed what an efficient company would require.740
Article 108 TFEU sets out the principles for notification and enforcement of
the State aid rules and Council Regulation 2015/1589 (the ‘Procedural
Regulation’) lays down the rules for the application of Article 108, such as
review and investigation of aid, notification of aid and recovery of
incompatible aid.746
The EU State aid rules require prior notification of any aid to the
Commission, and Member States must wait for approval before aid can be
put into effect. There are exceptions to the requirement that aid be notified
but in the air transport sector they are currently very limited, the principal
exceptions being small amounts aid within the de minimis thresholds
(discussed above at section 10.2.2) and SGEI cases (discussed above at
section 10.3.2.5).
From receipt of notification, the Commission has two months (one
month in the case of rescue aid) in which to issue a decision either
approving the aid or stating that a formal investigation will be carried out as
to whether the aid being granted is ‘compatible with the internal market’
within the meaning of Article 107(3). Notification will be preceded by
discussions between the Member State and the Commission. The
Commission issues a Notice in the Official Journal of the EU to inform
other Member States and interested parties. This further investigation can
take up to 18 months, or longer if agreed with the Member State.
Article 108(3) prohibits Member States from putting State aid into effect
without prior Commission approval. Such aid will be unlawful. Article
108(1) requires the Commission, whether of its own initiative or following
a complaint, to investigate unlawful aid – aid which has not been notified
747 – and to monitor existing aids, in case aid which it has authorised has
Where aid is not notified and is subsequently found to be illegal (or existing
aid misused) under Article 108(3), the Commission issues a decision
finding that aid breaches the State aid rules and requires the Member State
to recover the aid with interest payable from the date on which the unlawful
aid was granted until the date of its recovery.752 The purpose of the
recovery is to re-establish the situation that existed on the market prior to
the granting of the aid. There is a substantial time limit of 10 years from the
grant of aid for a decision ordering recovery.753 If the Commission orders a
Member State to recover aid, it must implement the decision in accordance
with national law, but must not apply national laws if they stand in the way
of effective and immediate implementation of the Commission decision.754
The Commission referred France to the Court of Justice under Article
108(2), however, for failure to implement a decision ordering it to recover
aid which it decided had been illegally granted to Ryanair by three airports.
While the French authorities had sent out recovery demands, they were
unable to execute them due to French laws under which recovery orders are
automatically suspended if there are appeals. Under EU law, the appeals do
not have a suspensory effect, meaning France would be obliged to recover
the aid. 755
If the recipient is unable to repay the funds, the Member State is in practice
obliged to institute winding-up proceedings and pursue the recipient as an
unsecured creditor.756 In certain cases where orders for recovery of aid have
been made in restructuring cases, the aid recipient’s assets have been
transferred to a new entity, without circumventing the obligation to recover
aid illegally granted (see section 10.3.2.2).757
Only the Commission, subject to review by the General Court and Court of
Justice, can adjudicate on the compatibility of aid with the internal market.
Article 108(3), which requires the notification of aid, is directly effective,
however, and can, therefore, be invoked directly by individuals who may
sue in the national courts to challenge aid which either has not been notified
or has been paid before securing Commission approval.758 In such a case,
the remit of the national court is to determine if ‘aid’ has been granted, and
if so, it must order the cessation and recovery of the unnotified aid, save in
exceptional circumstances.759 Unnotified aid is not automatically
incompatible with the internal market, but as the question of incompatibility
is a separate question, that does not prevent national courts overturning
unnotified aid.760
To determine whether a particular measure constitutes ‘aid’ within
the meaning of Article 107 can be a complex exercise for a national court.
The Procedural Regulation, therefore, enables national courts to ask the
Commission for information or for its opinion on points concerning the
application of the State aid rules, though this does not legally bind the
national courts.761 The scope of the national court’s obligations in dealing
with such a case has been clarified by the Court of Justice on a preliminary
ruling requested by the German court in the case of Frankfurt-Hahn airport
(FFH), Lufthansa AG v. Flughafen Frankfurt-Hahn GmbH.762 FFH, a public
company majority owned by the German Government, had a package of
arrangements with Ryanair, which was responsible for 95 per cent of its
traffic, comprising reduced fees and marketing support for the opening of
new routes. Lufthansa challenged the measures before the national court,
asking it to order cessation and recovery from Ryanair of aid which the
airport had allegedly paid.
The Commission then commenced a formal investigation under
Article 108(2), having reached a preliminary opinion that the measures
(which also included grants and a guarantee by the regional authority to
FFH), constituted ‘aid’. The national court, given its duty to consider
whether the measures constituted State aid, then requested a ruling from the
Court of Justice as to whether, in proceedings for cessation and recovery of
aid, it was bound by this preliminary opinion. The Court held that where the
Commission had opened a formal investigation, the national court need not
consider whether the measure in question constituted aid but could presume
that it was aid, relying on the fact that a Commission investigation had been
commenced. This would be the case even though the Commission has not
reached a final view. The national court was required to ‘adopt all the
necessary measures with a view to drawing the appropriate conclusions
from an infringement of the obligation to suspend the implementation of
that measure’.763 It follows that a national court may order the cessation
and recovery of allegedly unlawful State aid where the Commission has
launched an investigation. Where no such investigation has been
commenced, it is then for the national court to consider whether the
measures constitute State aid – in particular whether they constitute an
advantage and are selective.764
The FFH – Ryanair arrangements were ultimately found by the
Commission to be compatible with the EU State aid rules on the basis that
any differences in airport charges actually paid for the use of the
infrastructure were based on commercially justified differentiation.765 Aid
to FFH in the form of a guarantee on loans was found to breach the State
aid rules, however.766 Lufthansa subsequently challenged the Commission’s
assessment that public grants given to FFH did not constitute illegal State
aid and argued that State aid granted to the airport in the form of a
guarantee on loans had in effect been passed on to Ryanair as the most
important user of that airport.767
The EU State rules do not apply to aid granted by third countries to airlines
or airports within their territory, nor do the WTO rules apply in the air
transport sector. Air transport continues to be excluded from the WTO
General Agreement on Trade in Services (GATS), the Annex on Air
Transport Services excluding traffic rights and traffic related services.768
643. Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the
application of Article 108 of the Treaty on the Functioning of the European Union, OJ L
248, 24.9.2015, p. 9 (‘Procedural Regulation’); Commission Regulation 2015/2282 of 27
November 2015 amending Regulation (EC) No. 794/2004 as regards the notification forms
and information sheets OJ L 325, 10.12.2015, p. 1 (‘Implementing Regulation’); Regulation
1407/2013 of 18 December 2013 on the application of Articles 107 and 108 TFEU to de
minimis aid OJ L 352, 24 December 2013 p. 1.
644. Commission Decision 2012/21/EU of 20 December 2011 on the application of Article
106(2) of the Treaty on the Functioning of the European Union to State aid in the form of
public service compensation granted to certain undertakings entrusted with the operation of
services of general economic interest OJ L 7, 11.1.2012, pp. 3–10.
645. Communication from the Commission—Guidelines on State aid for rescuing and
restructuring non-financial undertakings in difficulty OJ C 249, 31.7.2014, pp. 1–28.
646. Communication from the Commission—Guidelines on State aid to airports and airlines OJ
C 99, 4.4.2014, pp. 3–34 (the ‘Aviation Guidelines’).
647. Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty
on the Functioning of the European Union OJ C 262, 19.7.2016, pp. 1–50. There are other
Commission Notices a discussion of which is beyond the scope of this work.
648. Case T-128/98 Aéroports de Paris v. Commission ECR [2000] II 3929; Communication
from the Commission — Guidelines on State aid to airports and airlines OJ C 99, 4.4.2014,
pp. 3–34 (‘Aviation Guidelines 2014’); Joined Cases T-443/08 and T-455/08 Mitteldeutsche
Flughafen AG and Flughafen Leipzig Halle GmbH v. Commission, (‘Leipzig-Halle airport’
judgment), [2011] ECR II-1311, in particular paras 93 and 94; Case T-196/04 Ryanair v.
Commission [2008] ECR II-3643; Aid to Berlin Brandenburg airport SA.41342, 3 August
2016 – cleared on the basis of the market economy investor principle hence no aid.
649. Ibid., see also Aviation Guidelines para. 35; Commission Notice on the notion of State aid
as referred to in Article 107(1) of the Treaty on the Functioning of the European Union OJ
C 262, 19.7.2016, p. 1 paras 201–209, 214.
650. Aviation Guidelines para 36.
651. Ibid para 37
652. Joined Cases T-267/08 and T-279/08, Nord-Pas-de-Calais [2011] ECR II 1999, para. 108.
653. Case C-482/99 France v. Commission (‘Stardust Marine’) [2002] ECR I 4397; Case C-
284/12 Deutsche Lufthansa AG v. Flughafen Frankfurt-Hahn GmbH, 21 November 2013.
654. Commission Decision 2013/199/EU of 25 July 2012 on State aid Case SA.29064 –
Differentiated air travel tax rates implemented by Ireland – Commission concluded that an
Irish air travel tax applicable to flights from Irish airports allowing a lower rate for
destinations up to 300 km from Dublin breached State aid rules; Case T-473/12 Aer Lingus
v. Commission, T-500/12 Ryanair v. Commission, General Court judgments 5 February
2015; appeal to Court of Justice pending C-164/15 P; Commission Decision Olympic
Airways – Greek State’s toleration of Olympic Airways’ failure to pay more than €350
million in tax and social security liabilities (Commission Press Release IP/05/1139 14
September 2005).
655. See Generally Guidelines on the notion of aid para. 51–54; Ryanair v. Commission supra.
656. Aviation Guidelines-requirement of non-discriminatory access-para. 108.
657. Commission Notice on the notion of aid, supra, para. 66.
658. Case C-39/94 SFEI and Others [1996] ECR I-3547, para. 60, and Case C-342/96 Spain v.
Commission [1999] ECR I-2459, para. 41; Ryanair v. Commission supra para. 38.
659. See generally Guidelines on notion of aid paras 83–105.
660. Ibid., paras 108–114.
661. T-196/04 – Ryanair v. Commission ECR [2008] II 3643 (Charleroi case).
662. Altmark case, supra paras 77–78.
663. Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty
on the Functioning of the European Union C/2016/2946 OJ C 262,19.7.2016, pp. 1–50 para.
197, 210; Commission Decision in State aid in case SA.38441 — United Kingdom — Isles
of Scilly Air links (OJ C 5, 9.1.2015, p. 4).
664. Council Regulation (EC) No. 994/98 of 7 May 1998 on the application of Articles 92 and 93
of the Treaty establishing the European Community to certain categories of horizontal State
aid OJ L 142, 14.5.1998, p. 1.
665. Council Regulation (EC) No. 994/98 of 7 May 1998 on the application of Articles [107 and
108] of the Treaty on the Functioning of the European Union to certain categories of
horizontal State aid OJ L 142, 14.5.1998, pp. 1–4.
666. Commission Regulation (EU) No. 1407/2013 of 18 December 2013 on the application of
Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis
aid OJ L 352, 24.12.2013, p. 1, Article 3.
667. Under previous de minimis Regulations, the term ‘enterprise’ had been used to denote
‘recipient’. Commission Regulation (EC) No. 69/2001 of 12 January 2001 on the
application of Articles [107] and [108] of the EC Treaty to de minimis aid, Article 1.
Recipient as ‘undertaking’ was introduced by Regulation 1998/2006).
668. Ibid. Article 4(3).
669. Ibid. Article 4(6).
670. Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of
aid compatible with the internal market in application of Articles 107 and 108 of the Treaty
OJ L 187, 26.6.2014, p. 1 (‘GBER’).
671. Case C-730/79 Philip Morris v. Commission ECR [1980] 2671 para. 11.
672. Case T-214/95 Het Vlaamse Gewest v. Commission [1998] ECR II-717.
673. See R&R Guidelines section 3.1.1.
674. Ibid. section 3.1.2.
675. Ibid. 3.6.2.2.
676. Aviation Guidelines paras 156–157.
677. Communication from the Commission to the European Parliament and the Council
COM(2001) 574 final 10 October 2001.
678. These included Sabena, Iberia, Aer Lingus, TAP, Air France, Olympic Airways, Alitalia,
and later, in 2009, Austrian Airlines pre-merger with Lufthansa. Airlines in other Member
States have latterly been granted such aid.
679. Communication from the Commission – Guidelines on State aid for rescuing and
restructuring non-financial undertakings in difficulty OJ C 249, 31.7.2014, pp. 1–28 (‘R&R
Guidelines’).
680. See R&R Guidelines para. 20(a)-(d)
681. Ibid., para. 21.
682. Ibid., para. 55.
683. Commission Notice on a simplified procedure for treatment of certain types of State Aid OJ
C 136, 16.6.2009, p. 3 – on the basis that meeting all substantive conditions the R&R
Guidelines, notably a threshold of EUR 10 million and the implementation of a
restructuring plan approved by the Commission – paras 121–123.
684. R&R Guidelines paras 78–82.
685. Ibid., paras 70–75.
686. Commission Press Release IP/01/1432, 17 October 2001. Sabena went into liquidation
before the aid in the form of EUR 125 million was used and it was allocated as rescue aid to
a wholly owned subsidiary, see Commission Press Release IP/01/1558 9 November 2001.
687. Commission Decision 2009/155/EC of 12 November 2008 on the loan of EUR 300 million
granted by Italy to Alitalia No. 26/8 (OJ 2009 L 52 p3) and Decision C(2008) 6745 final 12
November 2008, concerning State aid (N 510/2008 – Italy - Sale of assets if the airline
Alitalia; upheld on appeal by General Court Case T-123/09 Ryanair v. Commission ECR
[2012] 164, and by Court of Justice Case C-287/12 P Ryanair v. Commission 13 June 2013.
See European State Aid Law Quarterly 2014 Vol. 13 Issue 1 p. 98 Milligan, Sales.
688. Commission Press Release IP/08/1336, 17 September 2008.
689. Commission Decision of 28 August 2009 on State aid C 6/09 (ex N 663/08) — Austria
Austrian Airlines — Restructuring Plan (notified under document C(2009) 6686) OJ L 59,
9.3.2010, pp. 1–38; upheld, along with Commission decision approving the merger, by
General Court in Cases T-511/09 and T-162/10 Niki Luftfahrt GmbH v. Commission 13
May 2015.
690. R&R Guidelines paras 62–64.
691. Commission Press Releases IP/15/3121 9 January 2015, IP/15/6023 7 November 2015.
692. See Commission Competition Policy Brief Issue 10 July 2014.
693. Commission Decision of 24 July 1991, OJ L 300/48.
694. Commission press release IP(92) 606.
695. Commission Decision of 21 December 1993, OJ L 54/30.
696. Commission Decision of 6 July 1994, OJ L 279/29.
697. Commission Decision of 27 July 1994, OJ L 254/73 (decision annulled by ECJ, but aid
decision amended and aid granted).
698. Commission Decision of 7 October 1994, OJ L 273/22 (and see discussion above in this
section).
699. Commission Decision of 20 October 2001, OJ C 67/14, 17.3.2004; case N 636/2004.
700. Commission Decisions of 20 December 2001, OJ C 68/20 2003; case N 723/2001, 19
March 2003, OJ C 148/8 2003.
701. Commission Decision of 20 July 2004, OJ C 125/6; case N279/2004 (and see discussion in
this section).
702. Commission Decisions of 3 May 2005, OJ C 191/4, case N 69/2005; of 7 March 2007, OJ l
49/25, 22.2.2008; case C 10/2006; of 27 June 2012, OJ C 230/1, case SA 32523; of 6 March
2013, OJ C 152/12, 30.5.2013, case SA 35888; Case SA 38225; Case SA 37220;
Commission Decisions of 4 February 2014, OJ C 117/125; of 9 January 2015, OJ L 179/83.
703. Commission Decision of 8 March 2006, OJ C 204/3; case N512/2005.
704. Commission Decision of 12 November 2008, OJ C 53/2 2009; case N388/2008.
705. Commission Decisions of 19 January 2009; case NN 72/2009 and 28 August 2009, OJ L
59/1; case C 6/2009.
706. Commission Decisions of 15 November 2011, OJ C 102/4 2011; case N 504/2010 and of 27
June 2012, OJ L 301/29 2012; case SA.33015.
707. Commission Decision of 19 September 2012, OJ L 92/16 2013; case SA.30908.
708. Commission Decision of 9 January 2012, OJ L 92/1.
709. Commission Decision of 9 July 2014; case SA 32715.
710. Commission Decision of 15 May 2013, OJ C 204/4; case SA 35900; OJ C 37/55 2014;
Commission Decision of 29 July 2014; case SA 36874.
711. Commission Decision of 20.11.2012, OJ C 69/40, 8.3.2013; Commission Decision of 9 July
2014; case SA 34191.
712. Commission Decision of 11 June 2014, OJ C/251, 1.8.2014; case SA.38634.
713. Commission Decision of 7 November 2015; cases SA.35956 and SA.36868, Commission
press release IP/15/6023.
714. Aviation Guidelines para. 53.
715. Commission Decision 2004/393/EC of 12 February 2004 concerning advantages granted by
the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in
connection with its establishment at Charleroi OJ L 137 30.4.2004 p. 1 (the ‘Charleroi
case’).
716. T-196/04 – Ryanair v. Commission ECR [2008] II 3643.
717. OJ C 312, 9.12.2005, pp. 1–14.
718. Commission Decision of 1 October 2014 concerning measures SA.14093 implemented by
Belgium in favour of Brussels South Charleroi Airport and Ryanair.
719. Aviation Guidelines paras 25, 138–140, 151.
720. Ibid., para. 152.
721. Ibid., paras 154–155.
722. Case T-128/98 Aéroports de Paris v. Commission ECR [2000] II 3929; Communication
from the Commission — Guidelines on State aid to airports and airlines OJ C 99, 4.4.2014,
pp. 3–34 (‘Aviation Guidelines 2014’); Joined Cases T-443/08 and T-455/08 Mitteldeutsche
Flughafen AG and Flughafen Leipzig Halle GmbH v. Commission, (‘Leipzig-Halle airport’
judgment), [2011] ECR II 1311, in particular paras 93 and 94; Case T-196/04 Ryanair v.
Commission [2008] ECR II-3643; Aid to Berlin Brandenburg airport SA.41342, 3 August
2016 – cleared on the basis of the market economy investor principle hence no aid.
723. Ibid., see also Aviation Guidelines para. 35; Commission Notice on the notion of State aid
as referred to in Article 107(1) of the Treaty on the Functioning of the European Union OJ
C 262,19.7.2016, p. 1 paras 201–209, 214.
724. Aviation Guidelines paras 97–98.
725. Ibid., para. 100–103.
726. Ibid., para. 105.
727. Ibid., para. 106; see also Commission decision prohibiting aid of EUR 47 million by
Germany to Zweibrucken airport, on the basis it duplicated capacity provided by another
airport located 40 km away. Commission Press Release MEMO 14-544 1 October 2014.
728. Ibid., para. 108.
729. Ibid., para. 111.
730. See Commission Press Release IP/15/474 1 7 April 2015 – authorisation of aid to certain
French airports.
731. Aviation Guidelines paras 121, 127–129.
732. Ibid., para. 130.
733. There must be a measure entrusting the undertaking with the operation of the service in
question, see Case 127/73 Belgische Radio en Televisie v SABAM [1974] ECR 313.
734. The burden of proof that the performance of the service would be obstructed is on the
undertaking and the requirement is strictly construed, it not being sufficient that the
performance of the tasks would be merely hindered or made more difficult: Case T-260/94
Air Inter v Commission [1997] ECR II 997.
735. Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg GmbH [2003] ECR I-
7747, paras 89–93; Communication from the Commission on the application of the
European Union State aid rules to compensation granted for the provision of services of
general economic interest, OJ C 8, 11.1.2012, p. 4.
736. Council Regulation 1008/2008 of 24 September 2008 on common rules for the operation of
air services in the Community (Recast) OJ L 293, 31.10.2008, pp. 3–20, Articles 15–17.
737. See also Aviation Guidelines paras 69–70.
738. Ibid., para. 72.
739. See also Council Regulation 1008/2008, Article 17(8).
740. Regulation 1008/2008 requires that the right may be granted only through a public
procurement process (Article 17). See also Commission Communication on the application
of the European Union State aid rules to compensation granted for the provision of services
of general economic interest OJ C 8 of 11.1.2012, p. 4.
741. Commission Decision 2012/21 of 20 December 2011 on the application of Article 106(2) of
the Treaty on the Functioning of the European Union to State aid in the form of public
service compensation granted to certain undertakings entrusted with the operation of
services of general economic interest OJ L 7, 11.1.2012, p. 3; Aviation Guidelines para. 74–
76.
742. Commission Regulation (EU) No. 360/2012 of 25 April 2012 on the application of Articles
107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid
granted to undertakings providing services of general economic interest, OJ L 114,
26.4.2012, pp. 8–13.
743. Aviation Guidelines para. 72.
744. Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of
aid compatible with the internal market in application of Articles 107 and 108 of the Treaty
OJ L 187, 26.6.2014, pp. 1–78.
745. The draft amending Regulation is available at:
http://ec.europa.eu/competition/consultations/2016_gber_review/index_en.html.
746. Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the
application of Article 108 of the Treaty on the Functioning of the European Union OJ L
248, 24.9.2015, p. 9.
747. Procedural Regulation, supra, Article 12.
748. Ibid. Article 21.
749. Supra.
750. Articles 10 and 20. In the latter case, the Commission has power to make on-site monitoring
visits.
751. Joined Cases C-261/01 and C-262/01 van Calster and Others [2003] ECR I 12249, para. 75;
Case C-284/12, Deutsche Lufthansa AG v Flughafen Frankfurt-Hahn GmbH, 21 November
2013, para. 28.
752. See Council Regulation (EC) No. 2015/1589 of 13 July 2015 laying down detailed rules for
the application of Article 108 TFEU – the Procedural Regulation. Article 16. The
Commission has published the ‘Recovery Notice: Towards an effective implementation of
Commission decisions ordering Member States to recover unlawful and incompatible State
aid; Commission Regulation (EC) 271/2008 lays down rules with respect to the method for
fixing the recovery interest rate; rates are published on the Commission website:
http://ec.europa.eu/competition/state_aid/legislation/base_rates_eu28tris_en.pdf) from the
aid recipient.)
753. Procedural Regulation, Article 17.
754. Ibid. Article 16(3).
755. Commission Press Release IP/15/5442 27 July 2015.
756. Case C-499/99, Commission v. Spain, [2002] ECR I-06301; Commission Recovery Notice
supra, para. 20. Such proceedings may not be required if recovery is an absolute
impossibility, namely, where the recipient has no assets.
757. See discussion of Alitalia, Olympic and Sabena cases at section 10.3.2.2 above.
758. Case C-301/87 France v. Commission (Boussac), [1990] ECR I-307.
759. See also Commission notice on the enforcement of State aid law by national courts OJ C 85,
9.4.2009, pp. 1–22.
760. Ibid, para. 30.
761. Procedural Regulation, recitals 37–38.
762. Case C-284/12, Deutsche Lufthansa AG v. Flughafen Frankfurt-Hahn GmbH, 21 November
2013.
763. Ibid., para. 45.
764. Ibid., para. 34.
765. Commission Decision 2016/789 of 1 October 2014 on the State aid SA.21121 implemented
by Germany concerning the financing of Frankfurt Hahn airport and the financial relations
between the airport and Ryanair OJ L 134, 24.5.2016, p. 46.
766. Commission Decision of 1 October 2014 on the State aid SA.32833 implemented by
Germany concerning the financing arrangements for Frankfurt Hahn airport put into place in
2009 to 2011).
767. Deutsche Lufthansa v. Commission (T-764/15).] Case T-764/15: Action brought on 29
December 2015 — Deutsche Lufthansa v. Commission OJ C 68, 22.2.2016, p. 43, pending.
768. WTO General Agreement on Trade in Services (GATs) Annex of Air Transport Services
1994.
769. OJ L162 30 April 2004, p. 1.
770. Regulation 868/2004, supra, Article 5.
771. Ibid., see generally Article 4.
772. Ibid. Article 6.
773. Ibid. Article 7.
774. Ibid. Article 8.
775. Ibid. Articles, 9, 10, 12.
776. In the shipping sector, the EU imposed duties on container cargoes transported from the EU
to Australia by Hyundai, under Regulation 4057/86 of 22 December 1986 on unfair pricing
practices in maritime transport OJ No. L 179, 11. 7. 1985, p. 4. See Council Regulation
15/89 of 4 January 1989 introducing a redressive duty on containerised cargo to be
transported in liner service between the Community and Australia by Hyundai Merchant
Marine Company Ltd of Seoul, Republic of Korea OJ L4 06/01/1989 p. 1. See generally
EALA article: http://eala.aero/wp-content/uploads/2016/11/EU-Regulation-868-of-2004-
Report-of-a-unilateral-approach-in-regulating-unfair-subsidisation-and-unfair-pricing-
practies-and-its-failure.pdf.
777. Commission Communication COM (2012) 556 ‘The EU External Aviation Policy –
Addressing Future Challenges’ September 2012.
778. See: http://ec.europa.eu/smart-
regulation/impact/planned_ia/docs/2014_move_009_unfair_pricing_practices_en.pdf.
Annexes
ANNEX I
TREATY ON THE FUNCTIONING OF THE
EUROPEAN UNION – PROVISIONS ON
COMPETITION AND STATE AID
Article 101
Article 102
Article 103
Until the entry into force of the provisions adopted in pursuance of Article
103, the authorities in
Member States shall rule on the admissibility of agreements,
decisions and concerted practices and on abuse of a dominant position in
the internal market in accordance with the law of their country and with the
provisions of Article 101, in particular paragraph 3, and of Article 102.
Article 105
Article 106
Article 107
Article 108
Article 109
The Council, on a proposal from the Commission and after consulting the
European Parliament, may make any appropriate regulations for the
application of Articles 107 and 108 and may in particular determine the
conditions in which Article 108(3) shall apply and the categories of aid
exempted from this procedure.
ANNEX II
OTHER RELEVANT PROVISIONS OF THE
TREATY ON THE FUNCTIONING OF THE
EUROPEAN UNION COMPETENCES OF THE
EUROPEAN UNION
Article 3
Article 14
Article 49
Within the framework of the provisions set out below, restrictions on the
freedom of establishment of nationals of a Member State in the territory of
another Member State shall be prohibited. Such prohibition shall also apply
to restrictions on the setting-up of agencies, branches or subsidiaries by
nationals of any Member State established in the territory of any Member
State.
Freedom of establishment shall include the right to take up and
pursue activities as self-employed persons and to set up and manage
undertakings, in particular companies or firms within the meaning of the
second paragraph of Article 54, under the conditions laid down for its own
nationals by the law of the country where such establishment is effected,
subject to the provisions of the Chapter relating to capital.
Article 50
Article 119
1. For the purposes set out in Article 3 of the Treaty on European
Union, the activities of the Member States and the Union shall
include, as provided in the Treaties, the adoption of an
economic policy which is based on the close coordination of
Member States’ economic policies, on the internal market and
on the definition of common objectives, and conducted in
accordance with the principle of an open market economy with
free competition.
2. Concurrently with the foregoing, and as provided in the
Treaties and in accordance with the procedures set out therein,
these activities shall include a single currency, the euro, and the
definition and conduct of a single monetary policy and
exchange-rate policy the primary objective of both of which
shall be to maintain price stability and, without prejudice to this
objective, to support the general economic policies in the
Union, in accordance with the principle of an open market
economy with free competition.
3. These activities of the Member States and the Union shall
entail compliance with the following guiding principles: stable
prices, sound public finances and monetary conditions and a
sustainable balance of payments.
ANNEX III
TREATY ON EUROPEAN UNION PROVISIONS
Article 4
Article 50
1. Any Member State may decide to withdraw from the Union in
accordance with its own constitutional requirements.
2. A Member State which decides to withdraw shall notify the
European Council of its intention. In the light of the guidelines
provided by the European Council, the Union shall negotiate
and conclude an agreement with that State, setting out the
arrangements for its withdrawal, taking account of the
framework for its future relationship with the Union. That
agreement shall be negotiated in accordance with Article
218(3) of the Treaty on the Functioning of the European Union.
It shall be concluded on behalf of the Union by the Council,
acting by a qualified majority, after obtaining the consent of the
European Parliament.
3. The Treaties shall cease to apply to the State in question from
the date of entry into force of the withdrawal agreement or,
failing that, two years after the notification referred to in
paragraph 2, unless the European Council, in agreement with
the Member State concerned, unanimously decides to extend
this period.
4. For the purposes of paragraphs 2 and 3, the member of the
European Council or of the Council representing the
withdrawing Member State shall not participate in the
discussions of the European Council or Council or in decisions
concerning it.
A qualified majority shall be defined in accordance with
Article 238(3)(b) of the Treaty on the Functioning of the
European Union.
5. If a State which has withdrawn from the Union asks to rejoin,
its request shall be subject to the procedure referred to in
Article 49.
Index
Cargo markets
air transport services, 132
mergers affecting, 144
Cartels
agreements limiting production, 72
bid rigging, 72
collective boycott, standards, 72–73
description, 64
detection of cartels and ’whistleblowers’ - Commission Leniency Notice,
64–65
information exchange permissible, 74–75
pre-merger/joint venture discussions, 74
strategic information, prohibition of exchange of, 73–74
market-sharing (See Market-sharing)
price and trading conditions, fixing of Airfreight cartel investigation (See
Airfreight cartel investigation)
freightforwarders cartel, 66–67
price signalling, 75–76
third party facilitators, 65
Charter flights, 127–128
Chicago Convention State sovereignty over airspace, and, 17–18
Code-sharing agreements (CSAs) benefits, 77
blocked space code-sharing agreements, 78
competition assessment, 78–81
definition, 77
free flow code-sharing agreements, 77–78
types, 77–78
Collective boycott, 72–73
Collusive tendering, 72
Commission Leniency Notice, 64–65
Commitments, 144
decisions, 157–158
fare combinability, 148
frequency freeze and price remedies, 149–150
frequent flyer programmes, access to, 149
interlining-special prorate agreements, 148
intermodal agreements, 149
monitoring trustee, 150
regulatory commitments, 149
slot, 145–148
Compatibility with internal market. See State aid. See also Merger
Regulation.
Competition analysis of mergers and alliances
airport substitutability, 129–131
assessment
barriers to entry (See Barriers to entry in airline transport)
counterfactual, 136
dominance of carriers at slot restricted airports, 140
efficiencies, 140–142
failing firm defence, 143
foreclosure of competing carriers, 137
legal test, difference in, 133
overlapping routes (See Overlapping routes)
barriers to entry (See Barriers to entry in airline transport)
cargo air transport services, 132
charter flights, 127–128
counterfactual, 136
direct and indirect flights, markets for, 128–129
dominance of carriers at slot restricted airports, 140
failing firm defence, 143
impact of other alliances or agreements, 135–136
legal test, difference in, 133
market definition of air transport services.
O&D approach (See Point of origin/point of destination (‘O&D’) city-
pair approach)
other modes of transport, 131
overlapping routes (See Overlapping routes)
premium vs. non-premium passengers, 126–127
supply-side substitutability and network effects, 125–126
Complaints, 102, 103, 107, 108, 109, 156
Compliance programmes, 160
Computer reservation systems (CRSs). See Global Distribution Systems
(GDSs)
Concentrations. See also Merger Regulation
control, 113
joint, 114
sole, 113–114
defined, 113
EU dimension, 116–117
EU dimension, lacking an, 117–118
full-function joint ventures, 114–115
non-controlling minority shareholdings, 115
potential ‘enforcement gap’ and review of EUMR, 116
Cooperation agreements between airlines, 76
alliances. See Competition analysis of mergers and alliances
code-sharing agreements (See Code-sharing agreements)
CRSs/GDSs, cooperation on, 81
trade associations, 76–77
Cooperation between competition authorities. See also Interaction of EU
and national law
Council of Ministers. See Council of the European Union
Council of the European Union, 8
Counterfactual, 136
Court of Justice, 22–23, 31
appeals to, 10
preliminary rulings, 10
Cover pricing, 72
CRS-denial of access
discrimination, 103–105
Criminal offence, sanctions, 158–159
D
Damages
directive, 162
stand-alone actions in national courts, 161–162
De minimis aid. See also SGEI.
De minimis notice, 54–57
Direct effect, 15, 161. See also Enforcement of EU competition law
Discretionary grounds of compatibility. See State aid
Discounts, 66, 74, 91–92, 99–100, 106 See also Rebates
Discrimination access to airports, in, 105
charges, discriminatory, 108
CRS-denial of access, 103–105
landing charges, in, 106–107
quality of service, in, 108–109
Dominant position abuse of (See Abuse of dominant position)
assessment of dominance, 96–97
calculation of market share, 97–98
defined, 96
market share. See assessment of dominance relevant market
Double-marginalisation, 77, 141, 142
E
Economic activity, 16, 43, 46, 48–50, 165, 170, 175, 176, 190
Effect on trade between Member States notice on effect on trade, 54
Efficiencies, 140–141. See also Exemption
‘behind and beyond’ routes, 142
burden of proving efficiencies, 141
horizontal merger guidelines, 141
Enforcement of EU competition law appeals, 161
authorities and interaction of EU and national law, 151–152
Commission investigation powers, 152–153
dawn raids, 153–154
extraterritoriality, 154–155
information, request for, 153
legal professional privilege, 154
companies located outside the EEA complaints, 156
damages and private enforcement direct effect, 161
directive, 162
National courts, 161–162
stand-alone actions in national courts, 161–162
fines
Commission fining policy, 160
compliance programmes, 160
level of, 158–159
parental liability, 159–160
interaction of EU and national law, 151–152
inter-jurisdictional cooperation between competition authorities, 155–156
national competition authorities (NCAs), 151
proceedings
Commission decisions commitment, 157–158
prohibition, 157
settlement (cartel cases), 158
statement of objections, 156–157
English clauses, 89, 93, 100–101
Essential facility, 102
EU competition policy objectives, 12–13
EU competition rules in air transport (1988–2004)
Ahmed Saeed decision of Court of Justice, 31
block exemption ‘enabling’ Regulation 3976/87, 27
Commission block exemptions, 27–28
enforcement powers as regards EU, 30
ground handling, 30
IATA tariff consultations, 28
joint operations, 29
joint planning and co-ordination of schedules, 29
Regulation 3975/87 on the application of Articles 101 and 102 to air
transport, 26–27
slot allocation and airport scheduling, 29
technical agreements, 26
EU Merger Control Regulation 139/2004. See Merger Regulation.
EU /Department of Transport Alliance Report, 141
EU law
sources of Commission notices, decisions and case law of the European
Court of Justice, 11–12
directives, 11
regulations, 11
treaty articles, 11
EU single aviation market, 26
European Commission. See Institutions
European Common Aviation Area (ECAA)
provisions on competition, 36–37
European Competition Network, 65
European Economic Area (EEA), 5
European Economic Community (EEC) creation of, 3–4
European Parliament, 9–10
European Union, 3–7
EU-third country air transport companies located outside the EEA, 155
competition enforcement, obstacles to, 32–33
extraterritoriality, 154–155
inter-jurisdictional cooperation, 155–156
nationality clauses in third country air services agreements, 33
negotiation and conclusion of agreements
EU - US Agreement 2007, 35–36
European Common Aviation Area (ECAA), 36–37
other EU - third country agreements, 36–37
‘Open Skies’ Judgments, 33–35
Excessive pricing, 109
Exclusion of air transport from the application of EU Competition Law
Commission action under transitional rules, 21–22
services ancillary to air transport, 21
‘transitional’ rules, 21
Nouvelles Frontières decision of Court of Justice
Exclusive distributor, 86
Exclsuive purchase. See non-compete restriction
Exemption 101(3) TFEU, 58
abolition of notification - self assessment regime, 59
block exemptions. See also Block exemption
burden of proof, 59
criteria
efficiency gains, 59–60
fair share of benefits for consumers, 60–61
indispensability of restrictions, 61
no elimination of competition in substantial part of market, 61
Extraterritoriality. See also EU-third country air transport
F
Landing charges
discrimination in, 106–107
Legal professional privilege, 154
Liability, parental
fines, 159–160
Liberalisation of air transport. See also
Application of EU competition
law to air transport
business models, impact on, 37–38
Chicago Convention and state
sovereignty over airspace, 17–18
EU competition law application of, 22–23
exclusion of air transport from application of, 20–22
European Union
approach to liberalisation, 24
first liberalisation package 1987, 24
second liberalisation package 1990, 25
Single European Act 1986, 23
third liberalisation package 1992 - Single European Aviation Market,
25–26
US deregulation, 23–24
EU-third country air transport (See EU-third country air transport)
‘freedoms of the air’ and air services agreements, 18–19
international air transport, absence of competition regulation in, 20
Limitation period, 153, 162Loyalty programmes, 121, 149 See also
Frequent flyer programmes
Loyalty rebates. See Rebates
M
National courts, 10, 11, 15, 16, 23, 31, 57–59, 64, 65, 70, 151, 152, 154,
161–162, 164, 183–184
Nouvelles Frontières case, 22–23, 31
Nullity of agreements
actions in national courts based on, 58
severance of offending clauses, 57
O
Parental liability
fines, 159–160
Passengers
remium vs. non-premium, 126–127
Passive sales, 86
Penalties. See Fines
Point of origin/point of destination (‘O&D’) city-pair approach, 124–125
cargo air transport services, 132
other modes of transport, 131
scheduled passenger air transport, 125
Preliminary ruling. See also Court of Justice
Price-fixing
Airfrieght cartel. See Airfreight cartel.
Freightforwarders Cartel, 66–67
Price parity clauses See Most favoured nation (MFN)
Price signalling, 75–76
Primacy of EU law, 11, 15
Proceedings
enforcement of EU competition law Commission decisions
commitment, 157–158
prohibition, 157
settlement (cartel cases), 158
statement of objections, 156–157
Public undertakings (106), 15, 191
Q
Rebates, 99–101
Referrals, 119
Refusal to supply See Abuse of a dominant position
Regulation 868/2004, 184–186
consultation on, 186
unfair pricing practice, 185
Regulatory commitments, 149
Relevant market See Market definition
Remedies. See Commitments Resale price maintenance
agent discounting of commission, 91–92
Restriction of competition
appreciable. See Agreements of minor importance
restriction by object, 54–55
S
Undertaking
agents, 49
decisions of associations of, 52–53
economic activity, 48, 165
legal status, 48
public bodies, undertakings granted exclusive rights and Article 106
TFEU, 49–50
single economic entity, 48–49
US deregulation, 23–24
V
Whistleblowers, 64–65
WTO, 6, 20, 184
AEROSPACE LAW AND POLICY SERIES