Notice pursuant to Article 19(3) of Council Regulation No 17

Case COMP/38.006 - Online Travel Portal

(2001/C 323/03)

(Text with EEA relevance)

INTRODUCTION

1. On 3 November 2000 Air France Finance SA (Air France), Aer Lingus Ltd (Aer Lingus), Alitalia - Linee Aeree Italiane SpA (Alitalia), AUA Beteiligungen GmbH (Austrian Airways), British Airways plc (BA), Lufthansa Commercial Holding GmbH (Lufthansa), Finnair Oyj (Finnair), Iberia Líneas Aéreas de España SA (Iberia), Koninklijke Luchtvaart Maatschappij NV (KLM) and Online Travel Portal Limited (OTP) notified the Commission of a joint venture agreement (JVA) setting up Online Travel Portal Limited (OTP), a limited liability company incorporated under English law. On 13 July 2001 Online Travel Portal Ltd changed its registered name to Opodo Limited.

2. The Commission published a notice requesting comments on Opodo on 2 February 2001(1).

THE PARTIES

3. The nine shareholders in Opodo are all European airlines.

- Société Air France is the parent company of the Air France Group which is active in the air transport sector. Air France Finance is a wholly owned subsidiary of Société Air France which deals with strategic acquisitions.

- Aer Lingus Ltd is part of the Aer Lingus Group plc. Its core business is the provision of airline services.

- Alitalia - Linee Aeree Italiane SpA is the parent company of the Alitalia Group, whose core business is the provision of airline services.

- AUA Beteiligungen GmbH is a fully owned subsidiary of Austrian Airlines Österreichische Flugverkehrs AG which is active in the air transport sector. AUA Beteiligungen GmbH is a holding company dealing with strategic financial investments for the Austrian Airlines Group.

- British Airways plc is the parent company of the British Airways group and is active in the air transport sector.

- Lufthansa Commercial Holding GmbH is a holding company for several connected businesses which complement the activities of Deutsche Lufthansa AG. It is a fully owned subsidiary of Deutsche Lufthansa AG, whose core business is air transport.

- Finnair Oyj is the parent company of Finnair Group and is active in the air transport sector.

- Iberia Líneas Aéreas de España SA is the parent company of the Iberia group and is active in the air transport sector.

- Koninklijke Luchtvaart Maatschappij NV is the parent company of the KLM group of companies, which is active in the air transport sector.

RELEVANT MARKETS

4. The product market on which Opodo will operate is the market for travel agency services which comprises the marketing and distribution of airline seats and other travel and travel-related service. Opodo will offer Internet travel agency services including airline ticket sales, hotel bookings, car hire and travel insurance. In several recent merger cases the Commission has considered whether the market for online travel agency services should be considered as separate from the travel agency market as a whole(2). This issue has not been investigated in this case, however, since the competition concerns are the same whether Opodo is considered to be operating only on a narrowly defined online travel agency services market or on a broader travel agency services market.

5. In the abovementioned cases the Commission considered that the geographical market for virtual travel agencies was national in scope. This definition was based on language barriers and the need to set up national distribution arrangements for tickets. The Commission believes that this geographical market definition remains valid, although an EU-wide travel agency market may develop with the adoption of the euro and the growth of online agents.

6. The shareholders in OTP have only limited activities on the travel agency market in any Member State (eg shareholdings in existing travel agencies) and direct sales by phone or Internet on their own behalf are also relatively limited. However, all the shareholders have a large share of certain transport markets. The Commission generally defines passenger transport markets in terms of city pairs, with service between any pair of cities being a separate market. The Commission has not investigated the shareholders' position on various transport markets in detail in this case but it has been assumed that some of the shareholder airlines are dominant on at least some city pairs within the EU and may be dominant purchasers of travel agency services in their home market(3). There is therefore a concern that the shareholders might use their strong position on these related markets to leverage market share on the travel agency services market.

THE AGREEMENT

7. The notified agreement is a joint venture agreement establishing Opodo Ltd. The agreement was signed on 18 August 2000.

8. Opodo is a limited liability company incorporated under English law. It will be managed separately and independently of its shareholder airlines and will be open to participation by non-shareholders. Nine directors of Opodo will be appointed by the shareholders and there will be an independent chairman. The joint venture agreement provides that "The business shall be conducted in accordance with the business plan and in the best interests of the company on sound profit-making principles so as to generate the maximum long-term value of the company". There are a number of provisions in the JVA and the business plan intended to ensure that Opodo operates as an independent company in its dealings with both shareholder and non-shareholder airlines:

- Opodo will be managed separately from the shareholder airlines and none of the management or staff will have any contractual obligation to any of the shareholders,

- marketing agreements with both shareholder and non-shareholder airlines will be negotiated on a confidential basis by Opodo staff and no information relating to the contents of individual airline marketing agreements will be disclosed to Opodo's directors or shareholders,

- Opodo's staff and management will be located in premises which are separate from those of its parents,

- the shareholders will not have access to the information technology systems of Opodo nor to commercially sensitive information belonging to Opodo or to other shareholders,

- Opodo will ensure that its management and personnel are fully informed of the importance of maintaining the confidentiality of sensitive commercial information relating to its shareholders.

These safeguards are similar to those accepted by the Commission in relation to the Volbroker.com joint venture(4).

9. In the business plan originally notified to the Commission it was envisaged that airlines wishing to enter into marketing agreements with Opodo (shareholder or non-shareholder) would have to undertake as a minimum requirement to provide Opodo with access to published and unpublished fares available through online channels and with the lowest fares made available to other online travel agents (so-called most favoured nation clause - MFN). The Commission was concerned that these provisions would restrict competition on the travel agency services market and Opodo has now agreed to modify its business plan in accordance with the commitments set out below.

ARGUMENTS PUT FORWARD BY THE PARTIES

10. The parties argue that Opodo will be active on a separate market from its shareholders and that the JVA is therefore not a restrictive agreement. Opodo will be an independent player on the travel agency services market and as such should be free to enter into whatever contracts it wishes with airlines. Any restriction on this freedom could make it difficult for Opodo to compete with established on-line travel agencies. In particular, the parties have presented evidence that airlines enter into MFN contracts with some other travel agents and that Opodo should be free to request similar clauses from airlines.

11. The Commission accepts that Opodo will be active on a separate market from its parents but it is concerned that the airlines' equity interest in Opodo might lead them to treat it more favourably than other travel agencies (potentially restricting competition on the travel agency market) or to induce Opodo to discriminate against non-shareholder airlines (potentially restricting competition on transport markets). The parties have therefore offered various commitments intended to ensure that the shareholder airlines deal with Opodo on a strictly commercial basis and that Opodo treats all airlines equally.

COMMITMENTS OFFERED BY THE PARTIES

12. Each shareholder airline of Opodo Ltd undertakes that it shall:

- not enter into exclusive arrangements with Opodo relating to fares and product-related services(5) except in respect of such agreements that may have been individually negotiated between the shareholder and Opodo and are commercially justifiable,

- not contract with Opodo in respect of particular categories of products, services or geographic markets to afford it terms, including but not limited to terms in relation to fares, access to inventory and product-related services, on at least as favourable a basis as it offers to any other online travel agent in respect of such categories of products, services or geographic markets (MFN status), unless MFN status is commercially justified by the benefits, including but not limited to financial or technical benefits or market penetration, afforded to such shareholder by Opodo,

- not be prevented from offering fares, access to inventory and product-related services to any other online travel agent on a more favourable basis by reason of any MFN status granted to Opodo in circumstances where another online travel agent is able to offer the shareholder benefits that are comparable to or greater than those offered by Opodo,

- maintain a memorandum recording the benefits upon which it has assessed the commercial justification for affording Opodo MFN status in respect of particular categories of products, services, or geographic markets. Where a shareholder which grants Opodo MFN status refuses a request for MFN status from an online agent in which it has no equity interest for reasons other than the failure by that online agent to offer or provide the same benefits to the shareholder recorded as commercial justification for affording Opodo MFN status, the shareholder shall also record in the memorandum the reasons for the difference in treatment between Opodo and such online agent. This memorandum may be produced to the Commission from time to time upon request,

- not offer MFN status in respect of fares which are only accessible by customers on shareholder airlines' own websites.

13. Opodo Ltd undertakes:

- that it is not necessary to be a shareholder of Opodo in order to participate in Opodo as a marketing partner and that Opodo will not discriminate against non-shareholders but will offer fair and open access, under objective and equal conditions, to all prospective marketing partners whether or not they are shareholders,

- that shareholders are not obliged to confer MFN status on Opodo and that agreements conferring MFN status on Opodo will not be a requirement for shareholders or other airlines wishing to enter into industry standard agency agreements with Opodo,

- that it will maintain in place various safeguards against the exchange of commercially sensitive information between shareholders (see point 8.),

- that it will voluntarily apply those parts of the currently applicable CRS Code of Conduct(6) (the Code) relating to non-discrimination, transparency and neutral display of information, save those provisions of the Code that are not relevant to Opodo as an online travel agent, and subject to any change in the scope of the Code that may come into effect in the future,

- that, upon becoming an accredited IATA member, it will apply, in so far as it is possible to do so, the provisions of the standard IATA passenger sales agreement and will not expect or seek any different or more favourable treatment from its shareholders than any other online travel agency nor will it utilise principles different to those employed by websites of offline agents,

- that it will not seek that Amadeus will provide its CRS services to Opodo other than at market rates and on market terms and conditions and on a non-exclusive basis.

INTENTION OF THE COMMISSION

14. In view of the foregoing, the Commission intends to adopt a favourable position concerning Opodo. Before doing so, it invites interested third parties to submit their observations within one month of the publication of this notice in the Official Journal of the European Communities. These observations should be submitted quoting reference Case COMP/38.006 - Online Travel Portal, by post to: European Commission, Directorate-General for Competition,

Anti-Trust Registry,

Rue de la Loi/Wetstraat 200, B - 1049 Brussels fax (32-2) 295 01 28.

(1) OJ C 35, 2.2.2001, p. 6

(2) Case COMP/M 1812 - Telefónica Terra/Amadeus, decision of 27 April 2000. Case COMP/M 2149 - T-Online/TUI/C & N international (withdrawn 13.6.2001). Press release IP/01/670.

(3) Case IV/34.780 - Virgin/BA. Commission press release IP/99/504. BA found to be dominant purchaser of travel agency services in the UK.

(4) Commission press release IP/00/896.

(5) That is, including online functionality (e.g. e-ticketing, online check-in).

(6) Council Regulation (EEC) No 2299/89 of 24 July 1989 on a Code of conduct for computerised reservation systems.