# C_2012396EN.01002101.xml

| 21.12.2012 | EN | Official Journal of the European Union | C 396/21 |
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21.12.2012

EN

Official Journal of the European Union

C 396/21

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Communication of the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case COMP/39.595 — Continental/United/Lufthansa/Air Canada

(notified under document C(2012) 9787)

(Text with EEA relevance)

2012/C 396/09

1.   INTRODUCTION

INTRODUCTION

| 1. | According to Article 9 of 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 (1), the Commission may decide — in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment — to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission. According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission. |
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1.

According to Article 9 of 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 (1), the Commission may decide — in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment — to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission. According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission.

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2.   SUMMARY OF THE CASE

SUMMARY OF THE CASE

| 2. | On 19 June 2008, Air Canada (‘AC’), United Airlines (‘UA’), Continental Airlines (‘CO’) and Lufthansa (‘LH’), jointly ‘the parties’, announced their intention to conclude an agreement to form a joint venture covering all their passenger air transport services on transatlantic markets (‘A++ Agreement’). Within the joint venture, AC, UA, CO and LH cooperate on key parameters of competition such as pricing, capacity, schedules and marketing. On 25 July 2008, the Commission opened an ex officio investigation of the cooperation between the parties in A++ Agreement. |
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2.

On 19 June 2008, Air Canada (‘AC’), United Airlines (‘UA’), Continental Airlines (‘CO’) and Lufthansa (‘LH’), jointly ‘the parties’, announced their intention to conclude an agreement to form a joint venture covering all their passenger air transport services on transatlantic markets (‘A++ Agreement’). Within the joint venture, AC, UA, CO and LH cooperate on key parameters of competition such as pricing, capacity, schedules and marketing. On 25 July 2008, the Commission opened an ex officio investigation of the cooperation between the parties in A++ Agreement.

ex officio

| 3. | On 10 October 2012, the Commission adopted a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003, taking the provisional view that the A++ Joint Venture Agreement between the parties is likely to infringe Article 101 of the Treaty on the Functioning of the European Union. |
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3.

On 10 October 2012, the Commission adopted a preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003, taking the provisional view that the A++ Joint Venture Agreement between the parties is likely to infringe Article 101 of the Treaty on the Functioning of the European Union.

| 4. | The Commission considered that in the absence of their cooperation, LH and CO would be actual non-stop competitors on the Frankfurt-New York route, operating their own non-stop flights independently as they did before the implementation of the A++ Agreement. |
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4.

The Commission considered that in the absence of their cooperation, LH and CO would be actual non-stop competitors on the Frankfurt-New York route, operating their own non-stop flights independently as they did before the implementation of the A++ Agreement.

| 5. | In the preliminary assessment, the Commission expressed concerns that the cooperation between AC, UA, CO and LH in A++ Agreement would be likely to restrict competition by object on the Frankfurt-New York route with regard to premium passengers. |
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5.

In the preliminary assessment, the Commission expressed concerns that the cooperation between AC, UA, CO and LH in A++ Agreement would be likely to restrict competition by object on the Frankfurt-New York route with regard to premium passengers.

| 6. | Considering the parties' combined market position on the Frankfurt-New York route and the closeness of competition between LH and CO, the cooperation would be also likely to produce appreciable anti-competitive effects for premium passengers. The Commission took into consideration the fact that customers on the Frankfurt-New York route are relatively price inelastic and largely deprived of significant buyer power. |
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6.

Considering the parties' combined market position on the Frankfurt-New York route and the closeness of competition between LH and CO, the cooperation would be also likely to produce appreciable anti-competitive effects for premium passengers. The Commission took into consideration the fact that customers on the Frankfurt-New York route are relatively price inelastic and largely deprived of significant buyer power.

| 7. | The Commission further provisionally concluded that the competition that had existed before the cooperation between LH and CO was eliminated. This competition is unlikely to be replaced by competition from the existing competitors or potential new entrants due to substantial barriers to expansion and entry. These barriers to expansion and entry include slot constraints, hub advantages at both Frankfurt airport and New York JFK and Newark Liberty airports, as well as the frequency advantage of the parties. |
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7.

The Commission further provisionally concluded that the competition that had existed before the cooperation between LH and CO was eliminated. This competition is unlikely to be replaced by competition from the existing competitors or potential new entrants due to substantial barriers to expansion and entry. These barriers to expansion and entry include slot constraints, hub advantages at both Frankfurt airport and New York JFK and Newark Liberty airports, as well as the frequency advantage of the parties.

| 8. | Slot constraints are currently present at New York JFK and Newark Liberty airports and are likely to be present in the medium and long run at Frankfurt airport. Due to the hub advantages at Frankfurt and New York airports, the parties are likely to benefit more from economies of scale, brand name recognition, power of their frequent flyer programme (FFP), access to feed traffic and ability to attract corporate contracts than their actual or potential competitors without such hub advantage. Thanks to a higher number of frequencies operated on the Frankfurt-New York route, the parties are likely to have a higher quality of service than their actual or potential competitors, for which the customers are likely to agree to pay higher prices. |
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8.

Slot constraints are currently present at New York JFK and Newark Liberty airports and are likely to be present in the medium and long run at Frankfurt airport. Due to the hub advantages at Frankfurt and New York airports, the parties are likely to benefit more from economies of scale, brand name recognition, power of their frequent flyer programme (FFP), access to feed traffic and ability to attract corporate contracts than their actual or potential competitors without such hub advantage. Thanks to a higher number of frequencies operated on the Frankfurt-New York route, the parties are likely to have a higher quality of service than their actual or potential competitors, for which the customers are likely to agree to pay higher prices.

3.   MAIN CONTENT OF THE OFFERED COMMITMENTS

MAIN CONTENT OF THE OFFERED COMMITMENTS

| 9. | The parties subject to the proceedings have offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003, to meet the Commission’s competition concerns. The parties emphasised that this should not be interpreted as an acknowledgement that they have infringed the EU competition rules or that the A++ Agreement is incompatible with Article 101 of the TFEU. |
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9.

The parties subject to the proceedings have offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003, to meet the Commission’s competition concerns. The parties emphasised that this should not be interpreted as an acknowledgement that they have infringed the EU competition rules or that the A++ Agreement is incompatible with Article 101 of the TFEU.

| 10. | The commitments are briefly summarised below and published in full in English on the website of the Directorate-General for Competition at:
  http://ec.europa.eu/competition/index_en.html |
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10.

The commitments are briefly summarised below and published in full in English on the website of the Directorate-General for Competition at:

http://ec.europa.eu/competition/index_en.html

| 11. | The parties offer on the Frankfurt-New York route:






  (a) | to make arrival and departure slot pairs available at Frankfurt airport and/or New York JFK/Newark Liberty airports — at the competitor's choice — to allow to operate up to seven additional frequencies weekly (and up to 21 weekly frequencies should existing third party services on the route be withdrawn). The offer is subject to a number of conditions, including that the competitor has exhausted all reasonable efforts to obtain the necessary slots through the general slot allocation process. The parties also do not have to release more than one slot at New York JFK airport; |
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11.

The parties offer on the Frankfurt-New York route:

(a)

to make arrival and departure slot pairs available at Frankfurt airport and/or New York JFK/Newark Liberty airports — at the competitor's choice — to allow to operate up to seven additional frequencies weekly (and up to 21 weekly frequencies should existing third party services on the route be withdrawn). The offer is subject to a number of conditions, including that the competitor has exhausted all reasonable efforts to obtain the necessary slots through the general slot allocation process. The parties also do not have to release more than one slot at New York JFK airport;

| (b) | to enter into fare combinability agreements with competitors for premium passengers. Eligible competitors are all competitors which operate or have started to operate new or increased non-stop services on the Frankfurt-New York route, and do not operate a hub/focus-city airport at both ends of the route; |
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(b)

to enter into fare combinability agreements with competitors for premium passengers. Eligible competitors are all competitors which operate or have started to operate new or increased non-stop services on the Frankfurt-New York route, and do not operate a hub/focus-city airport at both ends of the route;

| (c) | to enter into special prorate agreements for traffic with a true origin and a true destination in Europe/Israel or North America/the Caribbean/Central America, provided that part of the journey involves the Frankfurt-New York route. Eligible competitors are all competitors which have started to operate new or increased non-stop services on the Frankfurt-New York route, and alone or in combination with their alliance partners do not operate a hub/focus-city airport at both ends of the Frankfurt-New York route; |
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(c)

to enter into special prorate agreements for traffic with a true origin and a true destination in Europe/Israel or North America/the Caribbean/Central America, provided that part of the journey involves the Frankfurt-New York route. Eligible competitors are all competitors which have started to operate new or increased non-stop services on the Frankfurt-New York route, and alone or in combination with their alliance partners do not operate a hub/focus-city airport at both ends of the Frankfurt-New York route;

| (d) | to open their frequent flyer programmes to a competitor which commences or increases services on the route, if such competitor does not have a comparable programme of its own and does not participate in any of the parties’ FFPs. |
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(d)

to open their frequent flyer programmes to a competitor which commences or increases services on the route, if such competitor does not have a comparable programme of its own and does not participate in any of the parties’ FFPs.

| 12. | The parties offer to give responsibility to a trustee to monitor the application of the commitments. In case of disagreement between a new entrant and the parties on the commitments, the parties offer a dispute resolution process where an arbitral tribunal will ultimately decide on the matter. |
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12.

The parties offer to give responsibility to a trustee to monitor the application of the commitments. In case of disagreement between a new entrant and the parties on the commitments, the parties offer a dispute resolution process where an arbitral tribunal will ultimately decide on the matter.

4.   INVITATION TO MAKE COMMENTS

INVITATION TO MAKE COMMENTS

| 13. | Subject to market testing, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring binding the commitments summarised above and published on the Internet, on the website of the Directorate-General for Competition. |
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13.

Subject to market testing, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring binding the commitments summarised above and published on the Internet, on the website of the Directorate-General for Competition.

| 14. | In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which any information they claim to be business secrets and other confidential information should be deleted and replaced as required by a non-confidential summary or by the words ‘business secrets’ or ‘confidential’. |
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14.

In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which any information they claim to be business secrets and other confidential information should be deleted and replaced as required by a non-confidential summary or by the words ‘business secrets’ or ‘confidential’.

| 15. | Answers and comments should preferably be reasoned and should set out the relevant facts. If you identify a problem with any part of the proposed commitments, the Commission would also invite you to suggest a possible solution. |
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15.

Answers and comments should preferably be reasoned and should set out the relevant facts. If you identify a problem with any part of the proposed commitments, the Commission would also invite you to suggest a possible solution.

| 16. | Observations can be sent to the Commission under reference number COMP/39.595 — Continental/United/Lufthansa/Air Canada either by e-mail (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address:





  European Commission |
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| Directorate-General for Competition |
| Antitrust Registry |
| 1049 Bruxelles/Brussel |
| BELGIQUE/BELGIË |

16.

Observations can be sent to the Commission under reference number COMP/39.595 — Continental/United/Lufthansa/Air Canada either by e-mail (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address:

European Commission

Directorate-General for Competition

Antitrust Registry

1049 Bruxelles/Brussel

BELGIQUE/BELGIË

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(1)  OJ L 1, 4.1.2003, p. 1. With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, respectively, 102 of the TFEU. The two sets of provisions are in substance identical. For the purposes of this notice, references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82 of the EC Treaty when applicable.

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