John Milligan - European Union Competition Law in the Airline Industry (Aviation Law and Policy) (Aviation Law and Policy Series)

European Union Competition Law in the Airline 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

The objective of the Series is to make a contribution to legal thinking on public international air and space law and policy, and their implementation at the regional and national levels, responsibility and liability of public bodies and service providers, competition law, insurance law, company law, and the complex relationship between EU law and public international law.

Readership

Aviation and space lawyers, academics, representatives of governments, international organizations, and companies involved in aviation and space activities.

The titles published in this series are listed at the end of this volume.

European Union Competition Law in the Airline Industry

John Milligan

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2017 Kluwer Law International BV, The Netherlands

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Printed in the United Kingdom.

To Gerry, Una, Russell, Dawn, with thanks for their encouragement in the writing of this book, and the other Milligans.

About the Author

John Milligan is a solicitor qualified in England and Wales, also admitted in Ireland and formerly a barrister, and has since 2001 been an EU & competition partner at Clyde & Co LLP, one of the leading aviation practices in the world. He has over 20 years experience advising in the aviation, marine transport, energy and insurance sectors. He specialises in all aspects of competition law, including mergers and alliances, distribution and other commercial agreements, cartel investigations, damages actions, abuse of dominance, market investigations and the EU State aid rules.

Prior to joining Clyde & Co, John was an associate at the Law Offices of SG Archibald in Brussels. He studied law at Queens University Belfast, Northern Ireland and completed a Masters degree (Licence spciale en droit europen) at the Universit Libre de Bruxelles, Belgium. John is a guest lecturer in EU competition law at the Institute of Air and Space Law at the University of Leiden, the Netherlands.

Introduction

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.

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, discusses abuse of a dominant position and the principles of Article

102 TFEU. discusses State aid (Articles 107109 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:

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.