The European Commission has adopted a proposal for a Regulation, which would give it clear powers to review…
The European Commission has adopted a proposal for a Regulation, which would give it clear powers to review cases relating to air transport between the Community and third countries. This would end the present anomaly where the Commission has jurisdiction on an all-European alliance, but not on an alliance with a US carrier, for example. Commenting of the proposal, Commissioner Monti said: Putting an end to this anomaly is all the more urgent in view of the recent European Court open-skies ruling which recognises EU competence on air transport relations with third countries and is expected to lead to more consolidation in the sector.
The regulation proposed to the Council and Parliament will give the Commission effective and efficient powers to examine for example alliances between EU and non-EU airlines, similar to those that it already has to review alliances between EU-based airlines (1). The Commission is also proposing to have the power to grant block-exemptions when justified. It is hoped that if approved, the new Regulation will come into force on 1 May 2004, at the same time as the new antitrust Regulation 1/2003, which lays down the rules and procedures to enforce Articles 81 and 82 of the treaty.
At the moment the Commission lacks effective enforcement powers for the application of the European competition rules to air transport between the European Union and third countries. This has so far been felt in particular in cases relating to transatlantic or other alliances between EU and non-EU carriers.
This is clearly an anomaly, given that the Commission was granted the power in the eighties (Regulation 3975/87) to apply the competition rules to air transport between airports in the EU, including to alliances between European airlines.
No rules or procedures exist for cases relating to air transport between the Community and third countries. Instead, the Commission can examine the alliance under Article 85 of the treaty which allows it to `propose` to the undertakings concerned `appropriate measures` to bring an infringement on competition rules and authorize Member States to take such measures.
Article 85 does not provide the Commission with the appropriate fact-finding tools, nor does it enable the Commission to require undertakings to bring an end to infringements and to impose remedies and penalties.
One direct result of this is that the examination of such alliances can take years six exactly in the case of the alliance between Lufthansa, SAS and United Airlines, on the one hand, and the alliance between KLM and Northwest, on the other hand.
This, of course, does not mean that the airlines concerned had to wait six years before they put in place their code-sharing, revenue-sharing or pooled their frequent flyers programmes, which usually characterise these link-ups. But the fact that the Commission cannot reach a decision in a shorter period of time creates legal uncertainty.
Airline sector only exception
The airline industry is the only sector where the Commission has no clear-cut powers to enforce the competition rules in so far as it involves non-EU carriers.
For all other economic sectors, with a few minor exceptions, procedural implementing regulations have been adopted and are fully applicable when the effects of anti-competitive agreements or abusive behaviour are felt on the EU market.
Regulation 1/2003, which will replace Regulation 17/62 and the procedural provisions of Regulation (EEC) No 3975/87, will not change this.
The Commission believes that the recent Court judgement in the open skies cases increases the need for a coherent European policy for international air transport. The Commission has in this regard proposed a package of measures on how to move forward (IP/03/281). There is no doubt that competition is an essential part of our policy for international air transport.
The purpose of the proposed Council Regulation is primarily to ensure a more effective and efficient framework for anti-trust procedures with regard to air transport between the Community and third countries. To that end it is proposed to delete the provision in Regulation 1/2003, which currently excludes from its scope air transport between the EU and third countries, with the result that all enforcement rules in Regulation 1/2003 will also apply to for such transport.
Moreover, it is proposed to repeal Regulation 3975/87, as it will have practically no further meaning following the amendment to Regulation 1/2003 and the proposed Regulation.
Finally, the Commission proposes to have the power to grant block exemptions, as it can already do at present in the case of air transport between European airports. At present there are two such block-exemptions and they concern tariff consultation for interlining and the allocation of landing and take-off slots at airports.
(1) The draft Regulation concerns air transport between the EU and third countries, which covers e.g. transatlantic airline alliances, but not mergers for which the Merger Regulation applies regardless of the origin of the airlines. Airline alliances are co-operative arrangements and cover often issues such as flight schedules and frequencies, pricing, code-sharing, the joint use of airport facilities and infrastructure and the pooling of frequent flyer programmes.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
