Case T‑162/10

Niki Luftfahrt GmbH

v

European Commission

‛Competition — Concentrations — Air transport — Decision declaring a concentration to be compatible with the common market — Assessment of the effects of the transaction on competition — Commitments’

Summary — Judgment of the General Court (Eighth Chamber), 13 May 2015

Judicial proceedings — Application initiating proceedings — Formal requirements — Brief summary of the pleas in law on which the application is based — General reference in support of a second plea to matters set out in the context of the first — Inadmissibility

Concentrations between undertakings — Examination by the Commission — Adoption of a decision finding a concentration operation compatible with the internal market without opening Phase II — Condition — No serious doubts — Need to obtain commitments from the undertakings concerned — Discretion — Judicial review limited to manifest error of assessment — Review extending to error of assessment in the case of opening of phase II and commitments entered into thereunder

Transport — Air transport — Access of EU carriers to traffic rights inside the Union and internationally — Conditions — Obligation on Member States to allocate traffic rights between the EU air carriers concerned according to a non-discriminatory and transparent procedure — Need for a bilateral agreement between the member State and non-member State concerned in the case of international traffic rights

Concentrations between undertakings — Assessment of compatibility with the internal market — Criteria — Anti-competitive effects — Creation or strengthening of a dominant position — Not possible to declare the concentration compatible with the internal market without undertakings from the parties with a view to remedying the effects on competition

Concentrations between undertakings — Assessment of compatibility with the internal market — Examination by the Commission — Burden of proof borne by the party challenging the decision that the concentration compatible

Concentrations between undertakings — Examination by the Commission — Definition of the market in question — Criteria likely to be different from those applicable in State aid matters

See the text of the decision. (see paras 85-87)

The Commission does not breach its duty to state reasons if, when exercising its power to examine concentrations, it does not include precise reasoning in its decision as to the appraisal of a number of aspects of the concentration which appear to it to be manifestly irrelevant or insignificant or plainly of secondary importance to the appraisal of the concentration. Such a requirement would be difficult to reconcile with the need to act quickly and the short timescales which the Commission is bound to observe when exercising its power to examine concentrations and which form part of the particular circumstances of proceedings for control of those concentrations. It follows that where the Commission declares a concentration to be compatible with the common market on the basis of Article 8(2) of Regulation No 139/2004 on the control of mergers between undertakings (‘the Merger Regulation’) the requirement to state reasons is satisfied when that decision clearly sets out the reasons for which the Commission considers that the concentration in question, where appropriate following modification by the undertakings concerned, does not significantly impede effective competition in the common market or in a substantial part of it, in particular by creating or strengthening a dominant position. (see paras 99, 100)

In order to determine whether an airline operating scheduled flights has a dominant position on the market it is necessary first to define the relevant market in transport services by determining either that the sector of scheduled flights constitutes a separate market or that alternative possibilities, such as charter flights, the railways and road transport, should be taken into account, as well as scheduled flights on other routes that might serve as substitutes. The test to be employed in that respect is whether the scheduled flight on a particular route can be distinguished from the possible alternatives by virtue of specific characteristics as a result of which it is not interchangeable with those alternatives and is affected only to an insignificant degree by them. It follows that the Commission has correctly defined the relevant market by developing, in the context of the control of mergers in the scheduled passenger air transport sector, the ‘point of origin/point of destination’ approach (‘O&D’), which corresponds to a city pair and which reflects the perspective of demand according to which consumers envisage all possible options, including different forms of transport, in order to travel from a city of origin to a city of destination. According to that approach, that combination of a point of origin and a point of destination forms a distinct market. (see paras 135, 136, 138, 139)

In the matter of concentrations between undertakings falling within the scope of EU competition law, definition of the relevant market does not necessarily correspond to the relevant market in relation to the authorisation of State aid, since the two procedures differ in both their subject-matter and their legal basis, the first subparagraph of Article 88(2) EC in one case and Article 2(2) of the Merger Regulation in the other. Thus, when examining State aid that may be authorised in accordance with Article 87(3)(a) EC, the Commission must ensure that the aid in question will not alter trading conditions to an extent contrary to the common interest. In the case of a decision on a restructuring plan, where the aid in question is intended to relieve an undertaking in difficulty of its indebtedness and forms part of a restructuring plan the purpose of which is to ensure that undertaking’s return to long-term viability, the effects of that aid are not limited to a particular market on which the undertaking is present, but extend to the latter’s overall situation. In the context of the control of concentrations, on the other hand, the Commission must ensure, in accordance with Article 2(2) and (3) of the Merger Regulation, that the concentration will not significantly impede effective competition in the common market or in a substantial part of it. The focus of the assessment is then the effect of the concentration on the competitive constraint. It is for that reason that the commitments proposed by the notifying parties and accepted by the Commission in the contested decision are intended to remedy the competition concerns created by the concentration on the markets on which the parties competed before the concentration. (see paras 145-147)

See the text of the decision. (see paras 149, 150, 167, 257, 259-261, 319)

When examining the compatibility of a concentration operation with the internal market, the Commission is required, pursuant in particular to Article 2 of the Merger Regulation, to examine the competitive effects of a concentration on the markets for which there is a risk that effective competition will be significantly impeded, in particular by the creation or strengthening of a dominant position. Although the Commission’s competitive analysis may be oriented, in part, towards the concerns raised by the third parties consulted during the administrative procedure, it is bound, even in the absence of any express request by such third parties, but where there are serious indicia to that effect, to assess the competition concerns created by the merger on all the markets which may be affected by it. However, where it is alleged that the Commission failed to have regard to a possible competition concern on markets other than those covered by the competitive analysis, it is for the applicant to adduce serious indicia of the genuine existence of a competition concern which, by reason of its effect, should have been examined by the Commission. In order to discharge that burden, the applicant should identify the relevant markets, describe the state of competition in the absence of the merger and indicate what would be the likely effects of a merger given the state of competition on those markets. (see paras 172-175)

When examining the compatibility of a concentration with the common market, the Commission is required to assess the competitive effects of the concentration on the markets on which there is an overlap between the activities of the parties to a concentration. It follows that if one of the parties already enjoys a monopoly on an air route, that is to say, a relevant market, before the concentration, that monopoly by definition escapes the analysis of the competitive effects of the concentration. On the other hand, that does not apply when the monopoly or dominant position on an air route results from or is strengthened by the concentration. In such a case, in the absence of commitments by the parties of such a kind as to remedy the effects on competition of the dominant position, the Commission cannot declare the concentration compatible with the internal market. (see paras 248, 249)

In order to serve a route between airports in two different States, an airline must have an international air traffic right, that is to say, authorisation to serve that route. Each State designates the airlines established on its territory which it authorises to serve a route between that territory and the territory of another State. The number of authorisations that can be granted by each State to service an international air route is traditionally determined by a bilateral international agreement between the two States concerned. Those traffic rights therefore constitute, a priori, a legal barrier to entry to an international air route. Those legal barriers were lifted within the European Union by Council Regulation No 2408/92 on access of Community air carriers to intra-Community air routes, which has since been repealed by Regulation No 1008/2008 on common rules for the operation of air services in the Community. In accordance with Article 15 of Regulation No 1008/2008, air carriers in possession of a valid operating licence issued by the competent authority of the Member State in which they have their principal establishment are to be entitled to operate intra-Community air services and Member States are not to subject the operating of those services by such a carrier to any permit or authorisation. On the other hand, traffic rights are still necessary in order to serve an air route between the territory of a Member State of the European Union and the territory of a non-member State. In that regard, since the open skies judgments of the Court of Justice and the adoption of Regulation No 847/2004, concerning the negotiation and implementation of agreements for air services between member and non-member States, EU air carriers, that is to say those that are neither owned nor controlled by a Member State or its nationals, can, in principle, compete with the air carriers of a Member State which are owned or controlled by a Member State or its nationals to obtain international traffic rights in a non-discriminatory and transparent procedure. However, that assumes that the bilateral agreement between a member and non-member State, laying down the conditions for the distribution of traffic rights, contains a ‘community ownership and control’ clause. In the case of a member State which has not concluded such a bilateral agreement with a non-member State, only air carriers controlled or owned by that member State or its nationals are able to obtain traffic rights, whereas EU carriers are excluded from routes between that member State and the said non-member State. (see paras 270-273, 277, 279-281)

See the text of the decision. (see paras 289-292, 295-298)

See the text of the decision. (see paras 293, 294, 302, 303, 312-317, 319, 327, 344-348, 353)