# C_2004106EN.01002202.xml

| 30.4.2004 | EN | Official Journal of the European Union | C 106/22 |
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30.4.2004

EN

Official Journal of the European Union

C 106/22

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Appeal brought on 26 February 2004 by British Airways plc against the judgment delivered on 17 December 2003 by the First Chamber of the Court of First Instance of the European Communities in case T-219/99 between British Airways plc and the Commission of the European Communities, supported by Virgin Atlantic Airways Ltd.

(Case C-95/04 P)

(2004/C 106/40)

An appeal against the judgment delivered on 17 December 2003 by the First Chamber of the Court of First Instance of the European Communities in case T-219/99 (1) between British Airways plc and the Commission of the European Communities, supported by Virgin Atlantic Airways Ltd, was brought before the Court of Justice of the European Communities on 26 February 2004 by British Airways plc (hereinafter BA), established in Waterside (United Kingdom), represented by R. Subiotto and J. Temple Lang, solicitors, R. O'Donoghue and W. Wood QC, barristers.

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The Appellant claims that the Court should:

| — | set aside the judgment in case T-219/99 British Airways plc v. Commission in whole or in part; |
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set aside the judgment in case T-219/99 British Airways plc v. Commission in whole or in part;

British Airways plc v. Commission

| — | annul or reduce the amount of BA's fine by an amount considered appropriate by the Court of Justice in the exercise of its discretion; and |
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annul or reduce the amount of BA's fine by an amount considered appropriate by the Court of Justice in the exercise of its discretion; and

| — | take any other measure that the Court of Justice deems appropriate. |
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take any other measure that the Court of Justice deems appropriate.

Pleas in law and main arguments:

| A. | The Court of First Instance Erred In Law By Applying The Wrong Test To Assess The Exclusionary Character Of BA's Commissions
  The Court of First Instance held that BA's commissions were ‘fidelity-building’, and, therefore, exclusionary. However, the Court of First Instance's ‘fidelity-building’ test cannot distinguish between customers' fidelity secured by abusive exclusionary behaviour and customers' fidelity resulting from legitimate price competition. If accepted, the Court of First Instance's ‘fidelity-building’ test would create significant legal uncertainty as to the scope of legitimate price competition, and thus create disincentives for firms to engage in legitimate price competition, frustrating the basic purpose of Community competition law. |
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A.

The Court of First Instance Erred In Law By Applying The Wrong Test To Assess The Exclusionary Character Of BA's Commissions

The Court of First Instance held that BA's commissions were ‘fidelity-building’, and, therefore, exclusionary. However, the Court of First Instance's ‘fidelity-building’ test cannot distinguish between customers' fidelity secured by abusive exclusionary behaviour and customers' fidelity resulting from legitimate price competition. If accepted, the Court of First Instance's ‘fidelity-building’ test would create significant legal uncertainty as to the scope of legitimate price competition, and thus create disincentives for firms to engage in legitimate price competition, frustrating the basic purpose of Community competition law.

| B. | The Court of First Instance Erred In Law By Disregarding The Evidence That BA's Commissions Had No Material Effect On Competitors
  BA's second ground of appeal concerns the Court of First Instance's findings on the effects of BA's commissions. Clear evidence showed that rivals' shares of sales increased during the period of the alleged infringement and that BA's share of travel agents' sales declined. The Court of First Instance dismissed this evidence, arguing that BA's conduct ‘cannot fail to have had’ an effect on its rivals and that BA's competitors would have done even better, but for its conduct. The Court of First Instance added that where a dominant undertaking implements a practice tending to oust its competitors, the fact that the result is not achieved is not sufficient to prevent a finding of abuse.
  This reasoning is defective. First, competition law requires the Court to examine the actual or likely effects of allegedly abusive conduct. This was certainly approproiate in this case, since BA's conduct had lasted sufficiently long to assess its effects. Second, there was clear evidence in the present case that BA's practices had no material effect. BA does not suggest that actual effects need to be demonstrated in every case. But it is clearly a different matter to suggest, as the Court of First Instance does, that clear evidence pointing to a lack of any effect can be disregarded. The Court of First Instance's findings in this regard would, if accepted, mean that incentive practices such as those at issue would be per se abusive, irrespective of their actual or likely effects. This is not the law under Article 82 EC, which requres an examination of ‘all the circumstances’ in order to assess whether rivals' opportunities were materially limited. |
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B.

The Court of First Instance Erred In Law By Disregarding The Evidence That BA's Commissions Had No Material Effect On Competitors

BA's second ground of appeal concerns the Court of First Instance's findings on the effects of BA's commissions. Clear evidence showed that rivals' shares of sales increased during the period of the alleged infringement and that BA's share of travel agents' sales declined. The Court of First Instance dismissed this evidence, arguing that BA's conduct ‘cannot fail to have had’ an effect on its rivals and that BA's competitors would have done even better, but for its conduct. The Court of First Instance added that where a dominant undertaking implements a practice tending to oust its competitors, the fact that the result is not achieved is not sufficient to prevent a finding of abuse.

This reasoning is defective. First, competition law requires the Court to examine the actual or likely effects of allegedly abusive conduct. This was certainly approproiate in this case, since BA's conduct had lasted sufficiently long to assess its effects. Second, there was clear evidence in the present case that BA's practices had no material effect. BA does not suggest that actual effects need to be demonstrated in every case. But it is clearly a different matter to suggest, as the Court of First Instance does, that clear evidence pointing to a lack of any effect can be disregarded. The Court of First Instance's findings in this regard would, if accepted, mean that incentive practices such as those at issue would be per se abusive, irrespective of their actual or likely effects. This is not the law under Article 82 EC, which requres an examination of ‘all the circumstances’ in order to assess whether rivals' opportunities were materially limited.

lack of any effect

per se

| C. | The Court of First Instance Erred In Law By Failing To Consider Whether There Was ‘Prejudice To Consumers’ Under Article 82(b) EC
  Conduct which ‘limits’ the market of competitors of a dominant company is unlawful under Article 82(b) EC only if it causes ‘prejudice to consumers’. Article 82(b) EC clearly protects competition and consumers, not competitors. The Court of First Instance erred in law by its failure to consider whether BA's commissions for successful travel agents harmed consumers. The judgment under appeal makes no analysis of this requirement, but only addresses the situation of BA's competitors. |
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C.

The Court of First Instance Erred In Law By Failing To Consider Whether There Was ‘Prejudice To Consumers’ Under Article 82(b) EC

Conduct which ‘limits’ the market of competitors of a dominant company is unlawful under Article 82(b) EC only if it causes ‘prejudice to consumers’. Article 82(b) EC clearly protects competition and consumers, not competitors. The Court of First Instance erred in law by its failure to consider whether BA's commissions for successful travel agents harmed consumers. The judgment under appeal makes no analysis of this requirement, but only addresses the situation of BA's competitors.

| D. | Even If BA's Commissions Had In Principle Been Capable of ‘Limiting’ Rivals' Markets, The Court of First Instance Erred In Law By Failing to Analyse These Effects
  BA's fourth ground of appeal needs to be considered only if, contrary to its first, second and third grounds of appeal, its incentives schemes were in principle capable of limiting rivals' markets to the prejudice of consumers, contrary to Article 82(b) EC. The judgment under appeal fails to analyse or quantify the extent to which BA's commissions limited rivals' markets in two respects: (i) the Court of First Instance wrongly treated the MAs and PRS as having the same effect, since each had different terms and conditions and was in operation for different periods, and at least one of them (the PRS) could not have been exclusionary on any basis; (ii) the Court of First Instance failed to examine ‘all the circumstances’ to assess how BA's rivals were affected by its commission schemes. |
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D.

Even If BA's Commissions Had In Principle Been Capable of ‘Limiting’ Rivals' Markets, The Court of First Instance Erred In Law By Failing to Analyse These Effects

BA's fourth ground of appeal needs to be considered only if, contrary to its first, second and third grounds of appeal, its incentives schemes were in principle capable of limiting rivals' markets to the prejudice of consumers, contrary to Article 82(b) EC. The judgment under appeal fails to analyse or quantify the extent to which BA's commissions limited rivals' markets in two respects: (i) the Court of First Instance wrongly treated the MAs and PRS as having the same effect, since each had different terms and conditions and was in operation for different periods, and at least one of them (the PRS) could not have been exclusionary on any basis; (ii) the Court of First Instance failed to examine ‘all the circumstances’ to assess how BA's rivals were affected by its commission schemes.

capable

| E. | The Court of First Instance Misapplied Article 82(c) EC In Relation To The Discriminatory Effect Of BA's Commissions
  The Court of First Instance misapplied Article 82(c) EC in finding that BA's commissions discriminated between travel agents. Article 82(c) EC does not require that all customers benefit from the same prices and terms and conditions. It proscribes differences only if: (i) the compared transactions are equivalent; (ii) the conditions applied to the transactions are different; and (iii) one trading party suffers a competitive disadvantage vis-à-vis the other trading party as a result of such differences. Instead of applying the express wording of Article 82(c) EC, the Court of First Instance simply assumed that the mere fact that two agents receive different rates of commission ‘naturally’ had a material impact on their abililty to compete with one another. |
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E.

The Court of First Instance Misapplied Article 82(c) EC In Relation To The Discriminatory Effect Of BA's Commissions

The Court of First Instance misapplied Article 82(c) EC in finding that BA's commissions discriminated between travel agents. Article 82(c) EC does not require that all customers benefit from the same prices and terms and conditions. It proscribes differences only if: (i) the compared transactions are equivalent; (ii) the conditions applied to the transactions are different; and (iii) one trading party suffers a competitive disadvantage vis-à-vis the other trading party as a result of such differences. Instead of applying the express wording of Article 82(c) EC, the Court of First Instance simply assumed that the mere fact that two agents receive different rates of commission ‘naturally’ had a material impact on their abililty to compete with one another.

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(1)  OJ C 20, 22.01.2000, p. 21.

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