COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC89) 417 final 
Brussels, 8 September 1989 
Application of the competition rules to air transport 
(Memorandum from the Commission) 
Proposal for a 
COUNCIL REGULATION (EEC) 
amending Regulation (EEC) No 3975/87 of 14 December 1987 
laying down the procedure for the application of the rules 
on competition to undertakings in the air transport sector 
Proposal for a 
COUNCIL REGULATION (EEC) 
amending Regulation (EEC) No 3976/87 on the application 
of Article 85(3) of the Treaty to certain categories of agreements 
and concerted practices in the air transport sector 
Proposal for a 
COUNCIL REGULATION (EEC) 
on the application of Article 85(3) of the Treaty to certain categories 
of agreements and concerted practices in the air transport sector 
(presented by the Commission) 
&vv\ t/'l'Vj* 
MEMORANDUM FROM THE COMMISSION TO THE COUNCIL 
Subject: application of the competition rules to air transport 
Backfirouncj 
1. In 1981 the Commission made a proposal to the Council for a 
Regulation laying down the procedures for the application of the 
competition rules to air transport, and included within the scope 
of the regulation international air transport with third 
countries . In the course of the discussions of this proposal in 
the Council it became clear that in order to reach agreement on 
the Commission's proposal it would be necessary to restrict its 
scope to international air transport within the Community, *a 
is 
.3 2 
change which was made at the time of Memorandum No 2 and was 
incorporated in Article 1(2) of Regulation (EEC) No 3975/87' 
adopted on 14 December 1987 in the context of the first civil 
aviation package. 
2. In its judgment of 11 April 1989 in Case 66/86 the Court of 
Justice confirmed its judgment in the "Nouvelles Frontière case" 
as regards the application of Article 85 of the Treaty and ruled 
that Article 86 is directly applicable by national courts, even in 
the absence of an applicable regulation under Article 87 or of 
action by a Member State cartel authority or by the Commission 
(under Article 88 or Article 89 respectively). The Court's 
judgment means that where a dominant airline succeeds, other by 
normal competitive means, in eliminating competition, even on a 
OJ No C 291, 12.11.1981, 
COM(84) 72 final of 15.3.1984. 
OJ Mo L 374, 31.12.1987. 
Judgment of 30 April 1986 in Joined Cases 289-213/84. 
- 2 -
domestic or on a Community-third country route, this behaviour is 
to be considered an abuse. Since there is no block exemption for 
airlines to discuss, let alone agree, fares on Community-third 
country routes, the elimination of price competition resulting 
from such discussions or agreements is liable to be an abuse of 
the dominant or joint dominant position which in most instances 
exists on such routes. The Court also ruled that a Member State is 
in breach of its Treaty obligations if it approves fares which 
infringe Article 85 or Article 86. Such would be the case for 
instance where a uniform agreed price structure has resulted from 
consultations which have not been exempted pursuant to Article 
85(3). 
3. Since, in respect of both domestic and of EC-third country air 
transport, the Commission is not in a position to grant exemptions 
under Article 85(3) nor to use normal procedures to rule on abuses 
of dominant position under Article 86, there is now a climate of 
serious uncertainty in which air carriers do not know what 
practices and arrangements they may legitimately engage in on such 
routes. If, even by accident, they act unlawfully, they run the 
risk of actions in national courts leading to the payment of 
compensation. Moreover, Member States face comparable 
uncertainties when approving the fares filed by carriers on such 
routes. In order to establish a framework of certainty, the 
Council should now give the Commission the necessary powers to 
clarify how Articles 85 and 86 apply to domestic and to 
extra-Community air transport. 
4. The Commission accordingly proposes that the Council adopt 
three Regulations. 
4.1. The first Regulation (Annex I) would modify Council Regulation 
(EEC) No 3975/87 in two ways: 
(i) deletion of Article 1(2) which contains the limitation on its 
scope of application. 
3 
- 3 -
The Commission points out that Community competition law 
would only apply where there is an effect on trade between 
Member States. Such an effect would have to be determined on 
a case by case basis. 
(ii) addition of an Article providing for consultations and, where 
necessary, negotiations under Council directives in the event 
of a conflict between Community competition law and third 
country legislative or regulatory provisions or with the 
provisions of air service agreements between Member States 
and third countries. 
4.2. The second Regulation (Annex II) would amend Council Regulation 
(EEC) No 3976/87 to include within its scope domestic air 
transport. On the basis of the power granted to it, the Commission 
would extend the block exemption for slot allocation to cover 
domestic air transport. The Commission would examine whether and 
if so how far it was also appropriate to grant block exemptions 
for other inter-airline cooperative activities in the area of 
domestic air transport. The duration of such block exemptions 
would be the same as for the other block exemptions granted 
pursuant to Regulation No 3976/87. 
4.3. The third Regulation (Annex III) would empower the Commission to 
grant block exemptions for airline agreements, decisions and 
concerted practices in respect of international air transport 
between the Community and third countries and concerned with the 
joint planning and coordination of capacity, revenue pooling, 
joint preparation of proposals on passenger tariffs and cargo 
rates and slot allocation at airports. 
5 
This third Regulation is similar to Council Regulation 3976/87 
but contains in addition a provision (Article 7(4)) to deal with 
the special situation which may occur where breaches of conditions 
or obligations or effects incompatible with Article 85(3) are the 
result of actions or provisions adopted by third countries or of 
provisions contained in air service agreements between Member 
States and third countries. 
5 OJ No L 374, 31.12.1987, p. 9. 
V 
wwiiwwiwwwiUijm |i II ,1,1, 
- A -
5. The Commission recognizes that restrictions of competition on 
routes between the Community and third countries are likely in 
general to have less direct distortive effects within the 
Community than restrictions on routes within the Community. 
Moreover, in the case of extra-Community routes, the Community is 
bound to take account of existing international agreements and of 
the need to seek to settle international differences by 
consultation and negotiation. 
The Commission, therefore, intends to adopt, on the basis of 
powers to be granted to it by the proposed Council Regulation, an 
implementing regulation in which the conditions and obligations 
attached to the exemptions will be less strict and thus afford 
more scope for cooperation between air carriers than those of 
Commission Regulation (EEC) No 2671/88 of 26 July 1988 , which is 
the corresponding block exemption regulation applicable in the 
case of intra-Community international air transport. 
6 OJ No L 239, 30-8.1988, p. 9. 
ANNEX I 
Proposât for. a 
COUNCIL REGULATION (EEC) 
amending . Regulation * (EEC) No 3975/87 of 14 December 1987 
laying down the procedure for the application of the rules 
on competition to undertakings in the air transport sector 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, and in particular to Article 87 thereof. 
Having regard to the proposal from the Commission'r 
Having regard to the opinion of the European Parliament2, 
Uhereas Council Regulation (EEC) No 3975/87 of 14 December 19873 formed part of a package of 
interrelated measures adopted by the Council as a first step towards 
completing the internal market in transport; whereas its scope was 
accordingly limited to international air transport between Community 
airports; 
Whereas, therefore, the Commission has no «eans at present of 
investigating directly cases of suspected infringement of Articles 85 
and 86 of the Treaty in respect of air transport within a Member State 
10J No C 
^OJ No C 
30J No L 374, 31.12.1987, p.1. 
m*ÊÊi*mm>mm 
- 2 -
or between a Community airport and an airport in a third country and 
lacks such powers to take decisions or impose penalties as are 
necessary for it to bring to an end infringements established by it; 
Whereas practices which affect competition in these areas of air 
transport may affect trade between Member States; whereas it is 
therefore desirable that rules should be laid down under which the 
Commission, acting in close and constant liaison with the competent 
authorities of the Member States, may take the requisite measures for 
the application of Articles 85 and 86 of the Treaty to these areas of air transport; 
Whereas there is a need to produce a secure and clear legal framework 
for international air transport between the Community and third 
countries and for domestic air transport within a Member State, while 
ensuring a coherent application of the competition rules; whereas 
therefore the scope of Regulation (EEC) No 3975/87 should be 
extended to these other areas of air transport; 
Whereas, in view of the characteristics of international air transport 
between the Community and third countries, account should be taken of 
the fact that the application to such transport of the provisions of 
Regulation "(EEC) No> 3975/87 may in some cases result in 
conflicts with the laws and rules of third countries or with provisions 
contained in international agreements between Member States and 
third countries applicable to services on the route or routes 
concerned; whereas provision should be made for appropriate action to 
be taken with a view to resolving such conflicts in accordance with 
Community interests and with Community obligations under international 
law; 
HAS ADOPTED THIS REGULATION: 
- 3 -
Article i 
Regulation (EEC) No 3975/87 is amended as follows:. 
1. The second paragraph of Article 1 shall be deleted. 
2- The fotlowing new -Article shall be inserted: 
Article 18a 
Conflicts of international lau 
1. Where the application of this Regulation in a particular 
case is liable to lead to a conflict with provisions laid 
down by law, regulation or administrative action of a third 
country, the Commission shall, at the earliest opportunity, 
hold with the competent authorities of the country concerned 
consultations aimed at resolving the conflict. The 
Commission shall inform the Advisory Committee referred to 
in Article 8 of the outcome of these consultations. 
2. Where the Commission finds that the application of this 
Regulation in a particular case is liable to lead to a 
conflict with the provisions of an international agreement 
between a Member State and a third country, it shall, after 
consulting the Advisory Committee referred to in Article 8, 
notify the Member State concerned of this finding. The 
Member State shall, within three months of the receipt of 
such notification, inform the Commission of the measures it 
intends to take with a view to resolving the conflict. 
3. Where agreements with third countries need to be negotiated 
by the Community, the Council, acting on a proposal by the 
Commission, shall authorize the Commission to open the 
necessary negotiations." 
f 
- A -
Article 2 
This Regulation shall enter into force on the day following that of its 
publication in the Official Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly 
applicable in all Member States. 
Done at Brussels, for the Oxncil 
ANNEX II 
.Pr.opoeal. for a 
COUNCIL REGULATION (EEC) 
amending Regulation (EEC) No. 3.976/87 
on the application of Article 85(3) of the Treaty to certain 
categories of agreements and concerted practices 
in the air transport sector 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, and in particular to Article 87 thereof. 
Having regard to the proposal from the Commission , 
2 Having regard to the opinion of the European Parliament , 
Whereas the scope of Council Regulation (EEC) No 3976/87 of 
14 December 1987 was .limited to international air transport-between Comnunity airports; 
Whereas the Commission should be enabled to grant similar block 
exemptions for agreements between undertakings, decisions by 
associations of undertakings and concerted practices related to air 
transport within a Member State; 
OJ No C 
>J No C 
30J No L 374, 31.12.1987, p.9. 
AO 
- 2 -
HAS ADOPTED THIS REGULATION: 
Article 1 
The word "international" shall be deleted in Article l of 
Regulation (EEC) No 3976/87. 
Article 2 
This Regulation shall enter into force on the day following that of its 
publication in the Official Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly 
applicable in all Member States. 
Done at Brussels, For the Council 
AS) 
AHNSX III 
Proposal for a 
COUNCIL REGULATION (EEC) 
on the application of Article 85(3) of the Treaty to certain 
categories of agreements and concerted practices 
in the air transport sector 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, and in particular to Article 87 thereof, 
Having regard to the proposal from the Commission , 
2 
Having regard to the opinion of the European Parliament , 
Whereas Council Regulation (EEC) No 3975/87 , as amended by 
Regulation No lays down the procedure for the application of the 
rules on competition to undertakings in the air transport sector; 
Whereas Article 85(1) of the Treaty may be declared inapplicable to 
certain categories of agreements, decisions and concerted practices 
which fulfil the conditions contained in Article 85(3); 
1 OJ No C 
2 OJ No C 
3 OJ No L 374, 31.12.1987, p. 1 
4 see page ... of this Official Journal. 
AZ 
- 2 -
Whereas common provisions for the application of Article 85(3) should 
be adopted by way of Regulation pursuant to Article 87; whereas, 
according to Article 87(2)(b), such a Regulation must lay down detailed 
rules for the application of Article 85(3), taking into account the 
need to ensure effective supervision, on the one hand, and to simplify 
administration to the greatest possible extent, on the other; whereas, 
according to Article 87(2)(d), such a Regulation is required to define 
the respective functions of the Commission and of the Court of Justice; 
Whereas international air transport between the Community and third 
countries is at present governed by a network of international and 
bilateral agreements between Member States and third countries; whereas 
many of these agreements encourage or allow air carriers to cooperate 
in matters of commercial importance; whereas in observing these 
agreements air carriers should not infringe the Treaty's compe­
tition rules, which apply fully to all air transport activities within 
the scope of Community law; whereas the application of the competition 
rules must nevertheless take account of obligations under existing 
international treaties and of the desirability of settling 
international disputes by consultation and negotiation; whereas air 
carriers should be enabled to conduct their business within a framework 
of reasonable certainty in relation to the competition rules; 
Whereas the Commission should therefore be enabled to declare by way of 
Regulation that the provisions of Article 85(1) do not apply to certain 
categories of agreements between undertakings, decisions by 
associations of undertakings and concerted practices; 
Whereas it is desirable, in particular, that block exemptions be 
granted for certain categories of agreements, decisions and concerted 
practices; whereas the Commission, in close liaison with the Member 
States, should be able to define precisely the scope of these 
exemptions and the conditions attached to them; 
Whereas there can be no exemption if the conditions set out in Article 
85(3) are not satisfied; whereas the Comission should therefore have 
power to take the appropriate measures where an agreement proves to 
AS 
- 3 -
have effects incompatible with Article 85(3); whereas the Commission 
should consequently be able first to address recommendations to the 
parties and then to take decisions; 
Whereas this Regulation does not prejudge the application of Article 98 
of the Treaty; 
HAS ADOPTED THIS REGULATION: 
Article 1 
This Regulation shall apply to international air transport between the 
Community and third countries. 
Article 2 
Without prejudice to the application of Regulation (EEC) No 3975/87 
^ahd<in accordance with Article 85(3) of the Treaty, the Commission 
may by "regulation declare that Article 85(1) shall not apply to 
certain categories of agreements between undertakings, decisions of 
associations of undertakings and concerted practices on 
international air routes between the Community and one or more 
third countries. 
2. The Commission may, in particular adopt such regulations in respect 
of agreements, decisions or concerted practices which have as their 
object any of the following: 
- joint planning and coordination of the capacity on scheduled air 
services, 
- sharing of revenue from scheduled air services, 
- joint preparation of proposals on tariffs, fares, rates and 
conditions for the carriage of passengers, baggage and cargo on 
scheduled services, 
*y 
- A -
- slot allocation at airports and airport scheduling. 
3. Without prejudice to paragraph 2, such Commission regulations shall 
define the categories of agreements, decisions or concerted 
practices to which they apply and shall specify in particular: 
(a) the restrictions or clauses which may, or may not, appear in 
the agreements, decisions and concerted practices; 
(b) the clauses which must be contained in the agreements, 
decisions and concerted practices, or any other conditions 
/ which must be satisfied; 
(c) the routes to which they apply. 
Article 3 
1. A regulation pursuant to Article 2 shall be made for a specified 
period. 
2. It may be repealed or amended where circumstances . have changed with 
respect to any factor which was basic to its being made; in such 
case, a period shall be fixed for modification of the agreements 
and concerted practices to which the earlier Regulation applies. 
Article 4 
Regulations adopted pursuant to Article 2 may include a provision that 
they apply with retroactive effect to agreements, decisions and 
concerted practices which were in existence at the date of the entry 
into force of such Regulations. 
AS 
- 5 -
Article 5 
Before adopting a regulation, the Commission shall publish a draft 
thereof and invite all persons and organizations concerned to submit 
their comments within such reasonable time limit, being not less than 
one month, as the Commission shall fix. 
Article 6 
The Commission shall consult the Advisory Committee on Agreements and 
Dominant Positions in Air Transport established by Article 8(3) of 
Regulation (EEC) No 3975/87 before publishing any such draft Regulation 
and before adopting any such Regulation. 
Article 7 
1. Subject to paragraph 4, where the persons concerned are in breach 
of a condition or obligation which attaches to an exemption granted 
by a Regulation adopted pursuant to Article 2, the Commission may, 
in order to put an end to such a breach: 
- address recommendations to the persons concerned, and 
- in the event of failure by such persons to observe those 
recommendations, and depending on the gravity of the breach 
concerned, adopt a decision that either prohibits them from 
carrying out, or requires them to perform, specific acts or, 
while withdrawing the benefit of the block exemption which they 
enjoyed, grants them an individual exemption in accordance with 
Article 4(2) of Regulation (EEC) No 3975/87 or withdraws the 
benefit of the block exemption which they enjoyed. 
2. Subject to paragraph A, where the Commission, either on its own 
initiative or at the request of a Member State or of natural or 
legal persons claiming a legitimate interest, finds that in any 
particular case an agreement, decision or concerted practice to 
which a block exemption granted by a regulation adopted pursuant to 
4Ç> 
- 6 -
Article 2(2) applies, nevertheless has effects which are 
incompatible with Article 85(3) or are prohibited by Article 86, it 
may withdraw the benefit of the block exemption from those 
agreements, decisions or concerted practices and take, pursuant to 
Article 13 of Regulation (EEC).$o> 3975/87, all appropriate measures 
for the purpose of bringing these infringements to- an end. 
Before taking a decision under paragraph ,2, the Commission may 
address recommendations for termination of the infringement to the 
persons concerned. .•'."* 
** . ' * 
To the extent that'the situation referred to in paragraph 1 or in 
paragraph 2 results from provisions laid down by law, regulation or 
administrative action of a third country or from the provisions of 
an air service agreement between a Member State and a4 third 
country, the Commission shall, before withdrawing the benefit of 
the block exemption, take appropriate action as specified in 
Article 18a of Regulation (EEC) No.3975/87* 
Article S 
This Regulation shall enter into force on the day following that of its 
publication in the Official Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly 
applicable in all Member States. 
Done at Brussels, For the : Council 
/T-3 

ISSN 0254-1475 
COM(89)417flnal 
DOCUMENTS 
EN 07 08 
Catalogue number : CB-CO-89-389-EN-C 
ISBN 92-77-52759-5 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
4?