PROPOSAL FOR A COUNCIL REGULATION ( EEC ) AMENDING REGULATION ( EEC ) NO 3975/87 LAYING DOWN THE PROCEDURE FOR THE APPLICATION OF THE RULES ON COMPETITION TO UNDERTAKINGS IN THE AIR TRANSPORT SECTOR
Date: 1991-08-07
Institutions: European Commission
Subjects: air transport, competition, intra-EU transport

COMMISSION OF THE EUROPEAN COMMUNITIES 

C0M(91) 272 final 

Brussels,  7 August  1991 

Proposal  for a 

COUNCIL  REGULATION (EEC) 

amending Regulation  (EEC) No 3975/87  laying down the 

HiH* 

procedure  for the application of the rules on 

competition  to undertakings  in the 

air  transport  sector, 

and 

Proposal  for a 

COUNCIL  REGULATION (EEC) 

Safe' 

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 

wm 

(presented by the Commission) 

-  2 -

A.  AMENDMENT  TO  REGULATION  (EEC)  No  3975/87  ON  PROCEDURE  FOR  THE 

APPLICATION OF COMPETITION  RULES 

1.  The Commission's  powers  to enforce  the competition  rules  in the air 

transport  sector  by  means  of  fact-finding,  imposing  orders  and 

sanctions and granting  individual  exemptions  is  limited, by Council 
Regulation  (EEC) No  3975/87<1>,  to  international  transport  between 

Member  States.  The  Commission's  powers  do  not  extend  to  either 

domestic  transport  nor  to  transport  between  a  Member  State  and  a 

third  country. 

2.  In  its Judgment  of  11 April  1989  in the  "Ahmed  Saeed"  case  (1) the 

Court  of  Justice  confirmed  its  Judgment  in  the  "Nouvelles 
Frontières  case"( 2)  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  implementing  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  than by normal  competitive means,  in eliminating  competition, 

even  on  a  domestic  or  on  a  Community-third  country  route,  this 

behaviour  is  an  abuse  contrary  to  Article  86.  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 

many  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). 

(1) OJ  No L 374, 31.12.1987. 

(2) Judgment  of  11 April  1989  in Case 66/86, [1989] ECR 

-  3 -

3.  Since,  in  respect  of  both  domestic  and  of  EC-third  country  air 

transport,  the  Commission  has  no  power  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  serious 

uncertainty  in which  air  carriers  can  not  know  what  practices  and 

arrangements  they  may  legitimately  engage  in  on  such  routes.  If, 

even  inadvertently,  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  proposed(3)  that  the  Council  adopt 

regulations  extending  the  scope  of  its  powers  to  enforce  the 

competition  rules  in  respect  of  domestic  and  third-country  air 

transport. The Council  has however  not  yet  acted  on  that  proposal. 

5.  Since  the  Council  has  committed  itself,  in  the  framework  of  the 

third  package of  air  transport  liberalisation measures,  to  lay down 

rules  on  cabotage  it  will  be  necessary  to  adopt  at  the  same  time 

measures  enabling  the  Commission  to  enforce  the  competition  rules 

to transport  within  a Member  State. 

6.  Therefore  the Commission  now withdraws  its earlier  proposal  insofar 

as  it  applied  to  domestic  transport,  and  makes  a  new  proposal 

(Annex  I)  consisting  in  a  regulation  to  delete  the  limitation  to 

international  transport  within  the  Community,  so  that  domestic 

transport  entirely  within  a single  Member  State  is also  covered  by 

Regulation  (EEC) No 3975/87. (Annex  I). 

(3) C0M(417) final,  8.9.1989. 

-  4 -

B.  AMENDMENT  TO REGULATION  (EEC) No 3976/87 ON GROUP  EXEMPTIONS 

7.  The  Commission's  powers  to  adopt  group  exemptions  is  limited,  by 

Council  Regulation  (EEC) No  3976/87<4>,  to  International  transport 

between  Member  States.  For  similar  reasons  to  those  set  forth 

above,  these  powers  should  now  be  extended  to  domestic  transport 

entirely within  a Member  State. 

8.  As part  of  the second  package of  liberalisation measures  in the air 

transport  sector  the  Council  extended  the  validity  of  Regulation 

(EEC)  No  3976/87  empowering  the  Commission  to  adopt  for  a  limited 

period  a  number  of  group  exemptions  to  the  competition  rules  so 

that  air  carriers  could  adapt  progressively  to  a  more  competitive 

envIronment. 

The Commission  on  that  basis adopted  three  Régulâtions(5): 

-  Regulation  (EEC)  No  82/91  of  26  July  1988  concerning  ground 

hand Iing services; 

-  Regulation  (EEC)  No  83/91  relating  to  computer  reservation 

systems  for  air  transport  services; and 

-  Regulation  (EEC)  No  84/91  concerning  Joint  planning  and 

coordination  of  capacity,  consultations  on  tariffs  on  scheduled 

air  services  and  slot  allocation at  airports. 

9.  The  Commission's  general  experience  with  these  group  exemptions  is 

that  they  satisfy  a  genuine  need  for  legal  certainty  among  air 

carriers  and  other  market  operators,  while  providing  an  incentive 

to abandon  previous more  restrictive  agreements. 

10.  In view  of  the  further  liberalisation  now  proposed,  the  Commission 

is  of  the  opinion  that  the  same  objectives  can  be  pursued  after 

31 December 

1992.  This  would 

imply  that,  subject 

to  the 

circumstances  as  they  appear  at  the  time,  in  particular  the  terms 

(4) OJ  No L 374, 31.12.1987. 

(5) OJ  No L  10, 15.1.1991. 

- 5 -

of  the  third  package adopted by  the Council,  the group  exemptions 

will  be  substantially  renewed  subject  to  some  tightening  of 

conditions  (as set  out  below) which  is made  desirable  by  progress 

attained 

in  creating  a  more  competitive  environment.  The 

possibilities for cooperation  to be  left to airlines will depend on 

the extent  to which  the new  regulatory  framework  creates  room  for 

increased competition. 

11. The  Commission  intends  to  make  the  following  changes  to  the 

existing regulations : 

-  replacement  of  the  exemption  for  capacity  discussions  by  an 

exemption  for  binding  schedule  coordination  (the  exemption  for 

non-binding schedule consultations will be maintained); 

-  (if appropriate) alignment of  the exemption  for  slot  allocation 

discussions  on  the  results  of  discussions  by  the  Council  on 

common  rules for  slot  allocation  (subject  to the need  to ensure 

compatibility  of  the  outcome  of  the  discussions  with  Article 

85(3) of  the EEC Treaty). 

The  exemptions  for  computer  reservation  systems-  and  ground 

handling  agreements  can  be  renewed  without  significant  changes, 

except  for  changes necessary  to take account  of  alterations  in the 

arrangements  of  the  computer  reservation  systems.  The  exemption 

for  tariff  consultations,  including  the  obligations  to  interline, 

will  be  renewed  with  some minor  changes which  will  not  affect  the 

substance  of  air  carriers'  obligations  but  will  clarify  the 

conditions  in practice. 

The Commission  considers  it useful  to have power  to adopt  a group 

exemption  in  favour  of  Joint  operations  on  new  routes  with 

relatively  few  passengers  for  limited  periods,  in  line  with  the 

practice  which  was  developed  in  individual  cases  during  the  past 

few years. 

- 6  -

12.  In order  to secure adoption of  the new group exemptions  by  the  time 
the present  exemptions expire, on  31 December  1992, the extension 
of Regulation  (EEC) No 3976/87  in order  to enable  the Commission  to 
adopt  these  new  group  exemptions,  should  be  in  place  by  30 June 
1992. 

The  Commission  will  then  follow  the  normal  procedure  provided  by 
Regulation  (EEC) No  3976/87,  i.e.  it will  invite comments  by  third 
parties and consult  the Advisory  Committee  on Restrictive  Practices 
and Dominant  Positions  in Air  Transport. 

13. The  Commission  accordingly  proposes  that  the  Council  adopt  a 
regulation  modifying  Regulation  (EEC)  No  3976/87  in  the  following 
ways  (Annex  II): 

(I) the  Regulation  would  also  apply  to  domestic  transport 

entirely within  a single Member  State; 

(il) the Regulation  is given an  indefinite validity; 

(ill) the  possibility  of  an  exemption  for  joint  operations  between 

airlines will  be provided  for; 

(iv) the  conditions  contained  in Article  2(2) of  the  Regulations 
are deleted,  as  is appropriate  in a regulation of  indefinite 
duration; and 

(v) a standard  clause  (new Article 3)  is  included on  the duration 
and  review of  the Commission's  implementing  regulations. 

C.  CHANGES  TO  EARLIER  PROPOSAL  TO  ENFORCE  THE  COMPETITION  RULES  IN 

RESPECT OF DOMESTIC AND THIRD-COUNTRY  TRANSPORT 

14.  In view of  the  inclusion of domestic air  transport  in the proposals 
for  a  third  air  transport  package,  the  Commission  now  limits  its 
earlier  proposal  to  enforce  the  competition  rules  in  respect  of 
domestic  and  third-country  transport,  to  transport  to  third 
countries . 

As  a  result,  Annex  II of  the  earlier  proposal  (C0M(89)  417  final, 
OJ  No C 248 of  29 September  1989, p. 9)  is withdrawn. 

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- 7 -

ANNEX I 

Proposal  for a 

COUNCIL REGULATION (EECÏ 

amending Regulation (EEC) No 3975/87 

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, Article 87 thereof, 

Having regard to the proposal  from the Commission^) 

Having regard to the opinion of the European Pari lament<2>, 

Having regard to the opinion of the Economic and Social Committee*3^ 

Whereas  Regulation  (EEC)  No  3975/87<4)  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  means  at  present  of 

investigating  directly  cases  of  suspected  infringement  of  Article  85 

and 86 of the Treaty  in respect of air transport within a Member  State 

and  lacks  such  powers  to  take  decisions  or  impose  penalties  as  are 

necessary  for  it  to  authorise  agreements  under  Article  85(3)  and  to 

(1) OJ No C 

(2) OJ No C 

(3) OJ No C 

(4) OJ No L 374, 31.12.1987, p.1. 

bring  to  an  end  infringements  established  by  it  in  relation  to 

transport  within  a Member  State; 

-  8  -

Whereas  air  transport  entirely  within  a  Member  State  now  also  is 

subject  to  Community  liberalisation  measures;  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  this  area  of  air  transport,  in 

situations where  trade between Member  States may  be  affected; 

Whereas  there  is a  need  to  produce  a  secure  and  clear  legal  framework 

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 this area of 

air  transport, 

HAS ADOPTED THIS REGULATION : 

Article 1 

The  word  "international"  is  hereby  deleted  in  Article  1(2)  of 

Regulation  (EEC) No 3975/87. 

Article  2 

This Regulation  shall  enter  into force on  the day  following  that  of  its 

publication  in the Official  Journal  of  the European  Commun!tes. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly 

applicable  in all Member  States. 

Done at Brussels, 

For  the Council 
The  President 

r 

L-, 
I 
r _ 
f-. 
*-

ANNEX  II 

Proposal  for a 
CWNCIU RE6UIATIQN (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 

THE COUNCIL OF THE EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic 

Community,  and  in particular Article 87 thereof, 

Having regard  to the proposal from the Commission*1), 

Having  regard  to the opinion of the European P aN lament*2), 

, 

Hav ing regard  to the opinion of  the Economic and Socla I ComrnltteeC3^, 

Whereas  in accordance with Council  Regulation  (EEC) No  3975/87*4),  as 
amended  by  Regulation  (EEC) No 
to  implement  the competition  rules  in respect  of air  transport  within a 

the  Commission  has  power 

(5), 

Member  State;  whereas  it  is  therefore  desirable  to  provide  for  the 

possibility  of  adopting  block  exemptions  applicable  to  that  area  of 

transport; 

(1) OJ No C 

(2) OJ No C 

(3) OJ No C 

(4) OJ No L 374, 
(5) OJ No 

31.12.1987, p. 1 

-  10 -

Whereas  Council  Regulation  (EEC)  No  3976/87(6),  as  amended  by 
Regulation  (EEC)  No  2344/90( 7 ),  empowers  the  Commission  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  the  power  to  adopt  these  block  exemptions  has  been  granted  for 

a  limited  period,  expiring  on  31  December  1992,  during  which  air 

carriers  can  adapt  to  the  more  competitive  environment  introduced  by 

changes  in  the  regulatory  systems  applicable  to  intra-Community 

international  air  transport; 

Whereas  a continuation of  block  exemptions  after  that  date  is justified 

by  the  further  measures  to  liberalize  the  air  transport  sector  adopted 

by  the  Community;  whereas  the  scope  of  these  block  exemptions  and  the 

conditions  attached  to  them  should  be  defined  by  the  Commission,  in 

close  liaison  with  the  Member  States,  taking  into  account  changes  to 

the  competitive  environment  achieved  since  the  entry  into  force  of 

Regulation  (EEC) No 3976/87, 

HAS ADOPTED  THIS REGULATION  : 

Article 1 

Regulation  (EEC) No 3976/87  is hereby  amended  as  follows: 

1.  The word  "international"  is deleted  in Article  1. 

2.  Article  2(2)  is replaced  by  the  following: 

"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: 

(6) OJ  No L 374, 31.12.1987, p. 9. 

(7) OJ  No L 217, 11.8.1990, p. 15. 

- 11 -

-  joint  planning  and coordination  of  airline schedules; 

-  consultations  on  tariffs  for  the  carriage  of  passengers 

and baggage and of  freight  on scheduled  air  services; 

-  Joint operations on new scheduled  air  services; 

-  slot  allocation at  airports and airport  scheduling; 

-  common  purchase,  development  and  operation  of  computer 

reservation  systems  relating  to  timetabling,  reservations 

and  ticketing by air  transport  undertakings; 

-  technical  and  operational  ground  handling  at  airports, 

such  as  aircraft  push  back,  refuelling,  cleaning  and 

security; 

-  handling  of  passengers,  mail,  freight  and  baggage  at 

airports; 

^,  services  for the provision of  In-flight caterIngv"  •*•••'-•• 

3.  Article  3  is replaced by the following: 

"Article 3 

A  regulation  pursuant  to  Article  2  shall  be  made  for  a  specified 

period. 

It may  be  repealed  or  amended  where  circumstance  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." 

4.  Article 8  Is deleted. 

-  12 -

Article  2 

This  Regulation  shall  enter  into  force on  1 July  1992. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly 

applicable  in all  Member  States. 

Done  at  Brussels, 

For  the Counci 
The  President 

- 13 -

Fiche d'impact sur  les PME  et  l'emploi 

1. OBLIGATIONS  ADMINISTRATIVES  DECOULANT  DE  L'APPLICATION  DE  LA 

LEGISLATION POUR LES ENTREPRISES 

Les compagnies aériennes devront  suivre certaines procédures en vue de 
respecter  les régies de concurrence. 

2. AVANTAGES POUR L'ENTREPRISE 

L'environnement  plus  concurrentiel  devrait  bénéficier  tous  les 
opérateurs  économiques,  y  compris  les  PME.  En  outre  les  régies  de 
concurrence  protègent  des  petites  compagnies  aériennes  contre  des 
pratiques  abusives  éventuelles  de  la part  de  concurrents  en  position 
dominante. 

Les exemptions par catégorie envisagées par  la proposition augmenteront 
la  sécurité  juridique  des  compagnies  qui  participent  à  des  accords 
compatibles avec  l'article 85 $ 3 du Traité CEE. 

3. INCONVENIENTS POUR L'ENTREPRISE  (Coût supplémentaire) 

Non 

4. EFFETS SUR L'EMPLOI 

Non 

5.  r *-T~lL EU CONCERTATION PREALABLE AVEC LES PARTENAIRES SOCIAUX ? 

Non 

•m  Y A-T-IL UNE ALTERNATIVE *Wim  XmfHMGHMm 

ï^ ^^^^^^^^^^^^^^^^^^ 

r 

* 

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Non 

ISSN 0254-1475 

COM(91) 272 final 

DOCUMENTS 

EN 

08  07 

Catalogue number : CB-CO-91-369-EN-C 

ISBN 92-77-75280-7 

Office for Official Publications of the European Communities 
L-2985 Luxembourg