2000/74/EC: Commission Decision of 14 July 1999 relating to a proceeding under Article 82 of the EC Treaty (IV/D-2/34.780 - Virgin/British Airways) (notified under document number C(1999) 1973) (Text with EEA relevance) (Only the English text is authentic)
Date: 1999-07-14
Institutions: European Commission
Subjects: United Kingdom, air transport, carriage of passengers, private sector, restriction on competition, travel agency

4.2.2000

EN

Official Journal of the European Communities

L 30/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 14 July 1999

relating to a proceeding under Article 82 of the EC Treaty

(IV/D-2/34.780 (cid:151) Virgin/British Airways)

(notified under document number C(1999) 1973)

(Only the English text is authentic)

(Text with EEA relevance)

(2000/74/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86 of the
Treaty (1), as last amended by the Act of Accession of Austria,
Finland and Sweden, and in particular Articles 3 and 15(2)
thereof,

lodged by Virgin Atlantic
Having regard to the complaint
Airways Limited on 9 July 1993, and the supplementary
complaint lodged by Virgin Atlantic Airways on 9 January
1998, alleging infringements of Articles 81 and 82 of the
Treaty by British Airways and requesting the Commission to
put an end to these infringements,

Having regard to the Commission decision of 20 December
1996 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission in accordance with Article 19(1) of Regulation No
17 and with the Commission Regulation No 99/63/EEC of 25
July 1963 on the hearings provided for in Article 19(1) and (2)
of Regulation No 17 (2),

consulting the Advisory Committee on Restrictive

After
Practices and Dominant Positions,

I. FACTS

A. THE PARTIES

(1) The

complainant, Virgin Atlantic Airways Limited
(Virgin), is a privately owned company incorporated in
1984 under English law. Virgin operates
scheduled
passenger services on a number of international routes
between London and the USA, Hong Kong, Athens and
Tokyo. Its principal offices are located in West Sussex,
England.

In 1997 Virgin ranked twenty-first in the world in terms
international scheduled passenger-kilometres flown,
of
and thirty-first for combined international and domestic
scheduled passenger-kilometres flown.

Virgin’s turnover in the year to 31 October 1994 was
GBP 444 million. Virgin employed 4 522 people at the
end of 1997 (3).

(2) The respondent, British Airways plc (BA), is a privately
owned company incorporated under English law. BA

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ 127, 20.8.1963, p. 2268/63.

(3) IATA World Air Transport Statistics No 42 WATS 4/98.

L 30/2

EN

Official Journal of the European Communities

4.2.2000

was formed in 1972 through the merger of British
Overseas Airways Corporation (founded in 1940) and
British European Airways (founded in 1946). BA was
privatised in 1987.

Its

services.

BA is the largest airline in the United Kingdom.
It
operates a wide range of domestic and international
scheduled and charter
scheduled route
network covers 15 destinations within the United
in 72
Kingdom and 155 international destinations
countries world-wide. In 1997 BA ranked first in the
world
scheduled
passenger-kilometres flown, and ninth for combined
passenger-kilometres
domestic
international
flown (4).

international

terms

and

of

in

BA’s consolidated turnover in the year to 31 March
1998 was GBP 8 642 million, on which it earned net
profits of GBP 460 million. In the year to 31 March
1998, BA employed an average of 60 675 people (5).

B. THE COMPLAINTS

(3) On 9 July 1993 Virgin lodged a complaint against
certain commercial practices of BA that were said to
constitute infringements of Articles 85 and 86 (now
Articles 81 and 82) of the Treaty.

In particular, three main types of practices were the
subject of the complaint:

(cid:145)(a) The offering of

rebates or other

to
customers and travel agents on the explicit or
implicit condition that they will obtain all or most
from BA
of
(loyalty/fidelity rebates);

requirements

incentives

flight

their

(b) The offering of

rebates, payable retrospectively,
conditional upon customers, and travel agents,
conducting a high proportion of
their business
with BA (target or (cid:145)kick-back(cid:146) rebates);

(c) The offering of
incentives

other
condition that
long-haul flights (incentives)(cid:146).

short-haul
flights, upgrades or
at nominal or no cost on
for

customers purchase

tickets

the

complainant’s

In
abovementioned
view,
(cid:145)discount structures incorporated in agreements between
((cid:133))
BA and travel agents or corporate customers
falling
operate as

requirements contracts

species of

the

within Article 85(1) of the EC Treaty(cid:146). Moreover, the
complainant also claims that BA is a dominant firm in
abuse of its dominant position,
in breach of what is
now Article 82, by implementing the abovementioned
practices whose effect would be (cid:145)to foreclose a highly
the
profitable and crucial business
United Kingdom market(cid:146) to the detriment of smaller
competitors.

sector of

travel

that

(cid:145)Virgin believes

(4) On 9 January 1998 Virgin lodged a supplementary
complaint against BA’s (cid:145)Performance Reward scheme(cid:146)
(PRS), alleging that
the PRS:
infringes Article 86; entrenches
the already serious
breach of Article 86 represented by the existing
discount structure operated by BA; and demonstrates a
cynical disregard for the position of the Commission as
set out in the SO in Case No IV/34 780 and as reflected
in the statement of the Commission at the oral hearing
on 12 November 1997.(cid:146) Virgin considered that the PRS
also breached what is now Article 81 of the Treaty.

(5) These complaints requested the Commission to take
actions against BA’s incentive schemes for travel agents
and BA’s incentive or discount schemes for corporate
customers. This Decision does not deal with BA’s
discount schemes for corporate customers.

C. BA’s INCENTIVE SCHEMES FOR TRAVEL AGENTS

(6) All IATA travel agents in the United Kingdom receive a
basic standard commission from BA. From 1976 until
1997, this was 9 % for international sales and 7,5 % for
domestic sales. Virgin’s first complaint concerned BA’s
for
introduction of
qualifying travel agents referred to as the (cid:145)Marketing
Agreements(cid:146)
(cid:145)Global Agreements(cid:146). Virgin’s
supplementary complaint concerned the PRS, a revision
by BA of the incentive scheme applicable to all travel
agents.

additional

and the

incentive

schemes

1. The Marketing Agreements (MAs)

(7) BA has special agreements, called Marketing Agreements
(MAs), with certain IATA travel agents in the United
Kingdom under which they receive payments
in
addition to their basic commission under one or more
of the following headings:

(4) Ibid.
(5) British Airways Report and Accounts for the year ended 31 March

1998.

(a)

commission,

an additional
called (cid:145)Performance
Reward(cid:146), plus certain special bonuses, based on the
volume of sectors flown on BA;

4.2.2000

EN

Official Journal of the European Communities

L 30/3

(b)

(c)

cash sums from a training fund for travel agents’
staff to attend BA training courses;

cash sums from a business development fund made
available by BA for promotional and marketing
interest agreed with travel
projects of mutual
agents.

into an individually negotiated MA with BA. BA divides
these agents into category A and category B. Category A
agents are those with a flown revenue greater than GBP
50 million. Category B agents have a flown revenue
greater than GBP 10 million. Category A includes, inter
alia: Thomas Cook; Hogg Robinson; Carlson Wagonlit.
Category B includes, inter alia, P & O.

(8) These special agreements are in principle reserved for
IATA agents in the United Kingdom with more than
GBP 500 000 annual sales (flown revenue) with BA. As
at August 1993, BA had approximately 360 MAs with
the most
in the United
travel
Kingdom. All of them had been concluded for one-year
terms. It was noted in the Commission’s Statement of
Objections of 20 December 1996 that these schemes
had been in effect at least since 1992. These schemes
have
the Statement of
Objections (6).

remained in place

important

agents

since

(9) The scale of incentives given under the MA depend on
the size of the travel agent. Travel agents with annual
flown revenue exceeding GBP 500 000 but below GBP
10 million are offered a standard MA. Travel agents
with a flown revenue exceeding GBP 10 million enter

Standard MAs

(a) T h e p e r f o r m a n c e r e w a r d a n d o t h e r

s p e c i a l b o n u s e s

(10) The Performance Reward is calculated on a sliding scale,
based on the extent to which a travel agent increases
the value of its sales of BA tickets (BA flown revenue).
There are different scales of Performance Reward per
sector sold on BA (each return ticket has two sectors),
depending on the type of the sector flown:
longhaul,
shorthaul, etc. The higher the growth, the larger the
cash payment per sector.
In addition to the general
Performance Reward outlined above, certain routes (for
special
instance, North Atlantic)
performance bonus.

qualify

for

a

(11) The Performance Reward scheme offered by BA under the 1995/1996 standard MA for travel
agents with BA flown revenue exceeding GBP 500 000 but below GBP 10 million is set out below:
(The (cid:145)performance award(cid:146) specified in the table is paid to the travel agent for each BA ticket of the
type in question that it has sold

Target
(flown revenue as %
of previous year’s
level)

Longhaul
Premium

Performance award
(GBP)

Special bonus
(GBP)

World Traveller

Club Europe

Euro Traveller

Super Shuttle
Executive

North Atlantic

100

105

110

115

120

125

130

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

(6) BA’s reply of 13 August 1993 to a Commission request

for
information indicated that MAs had been in operation at least since
1992. The same letter had attached to it a standard MA for the
reply of 13
period from April 1993 to March 1994. BA’s
December 1995 to a Commission request for information indicated
that the scheme had continued in operation and that MAs were in
force up to the end of
the 1995/1996 season. Following the
Commission’s Statement of Objections of 20 December 1996 none
of BA’s
indicated any change in their
commercial policy.

subsequent

statements

* Parts of

this text have been edited to ensure that confidential
those parts are enclosed in square

information is not disclosed;
brackets and marked with an asterisk.

L 30/4

EN

Official Journal of the European Communities

4.2.2000

The performance targets were a percentage of the total flown revenue produced by the agent for
BA during the same period in the preceding year.

The categories were defined as follows by BA:

(cid:151) Longhaul Premium is defined as Concorde, First Class and Club World;

(cid:151) World Traveller is defined as World Traveller to, from, or within the Americas and Caribbean,

Africa, Australia, New Zealand and Asia;

(cid:151) Club Europe is defined as Club Europe to, from or within Continental Europe including the

Republic of Ireland, Cyprus and Israel;

(cid:151) Euro Traveller is defined as Euro Traveller to, from or within Continental Europe including the

Republic of Ireland, Cyprus and Israel;

(cid:151) Longhaul is defined as to, from or within the Americas and Caribbean, Africa, Australia, New

Zealand, Asia including Turkey and Russia;

(cid:151) Shorthaul is defined as to, from or within Continental Europe including Cyprus and Israel;

(cid:151) North Atlantic is defined as to, from or within USA, Canada and Bermuda.

The individually tailored MAs

(12) The Performance Reward (in GBP) per sector flown on BA in the specified categories that BA
agreed to pay under the MA 1995/1996 with Thomas Cook (a (cid:145)Category A(cid:146) travel agent) during the
period 1 April 1995 to 31 March 1996 is set out below: (The (cid:145)performance award(cid:146) specified in the
table is paid to the travel agent for each BA ticket of the type in question that it has sold)

Target
(flown revenue as %
of the previous year’s
level)

Longhaul
Premium

Performance award
(GBP)

Special bonus
(GBP)

World Traveller

Club Europe

Euro Traveller

Super Shuttle
Executive

North Atlantic

101,5

102,5

105,0

107,5

109,5

112,5

115,0

120,0

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

(13) The table below shows the Performance Reward and the special bonus (in GBP) payable to a
sample of the other (cid:145)Category A(cid:146) travel agents under the MAs 1995/96 (period 1 April 1995 to 31
March 1996) for each sector flown in Longhaul Premium and North Atlantic routes, when their
sales with BA attain 105 % of their preceding year’s level.

4.2.2000

EN

Official Journal of the European Communities

L 30/5

Travel agent

Hogg Robinson BTI

Carlson Wagonlit

American Express (at 106 %)

Performance reward
(GBP)

Longhaul Premium

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

Special bonus
(GBP)

North Atlantic

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

(14) The MAs also provide (cid:145)partner bonuses(cid:146) on sectors flown on selected BA franchise partner routes,

for instance: Cityflyer Express; GB Airways; Loganair; and Maersk Air Ltd.

(15) Two features of these bonus commissions should be noted:

(a)

travel agents are forced to increase their sales of BA tickets year on year to qualify for the
payment of any Performance Reward or bonus;

(b)

although the Performance Reward or bonuses are not paid in respect of sectors flown on BA
domestic services within the United Kingdom (except for Super Shuttle Executive sectors flown
at Executive and Timesaver fares), domestic sectors count for the achievement of the target
thresholds, since the latter are computed in terms of global flown revenue which includes:
longhaul, shorthaul and domestic.

(b) T r a i n i n g s u p p o r t a n d b u s i n e s s d e v e l o p m e n t f u n d

(16) Under the MAs, BA provide certain sums of money to be spent by travel agents on the training of
their staff. The MAs also provide for the establishment of BA of business development/marketing
funds to be spent by every travel agent in activities such as direct mail of BA’s promotional
material, conferences, airport tours and promotional evenings. The MAs specify that these funds are
designed to generate increased revenue for BA.

(17) For instance, the provisions on training and marketing support incorporated into the MA with

Thomas Cook for 1993/1994 are set out below:

(cid:145)8. Thomas Cook will develop joint marketing proposals together with its British Airways
Account Manager which are designed to increase passengers and revenue for both partners.

9. British Airways will provide a sum of money for the year 1 April 1993 to 31 March 1994 for
this joint activity in the areas of Marketing and Sales Promotion. The

the purposes of
Marketing and Training Support Fund for 1993/1994 will be GBP 670 000.

((cid:133))

11. The Marketing Fund is intended to be used to generate increased revenue for British Airways.
Any promotional activity such as those listed below that can be seen to generate revenue will
be preferred:

(a) marketing activities such as direct mail of British Airways promotional material (may be

customised), local advertising featuring British Airways services or campaigns;

L 30/6

EN

Official Journal of the European Communities

4.2.2000

(b) sales promotion activities such as staff events (e.g. product updates, conferences), staff
incentives, client events (e.g. airport tours, promotional evenings, secretaries workshops)
and client incentives.

The above list of examples is not exhaustive. Other forms of marketing or promotional
activities are open to discussion with your British Airways Account Manager.

((cid:133))

17. British Airways is committed to supporting your investment in quality training through the
Training Fund. This fund can be used for all courses run by Speedwing Training. A list of the
locations will be
available courses is attached. Depending upon demand, other regional
considered. This offer can also include in-company programmes. All courses will be subject to
the usual terms and conditions of Speedwing Training as detailed in their prospectus. Any
applicable fee for amendments, cancellations or no-shows will be debited to your account.

18. A sum of GBP 80 000 has been set aside for training and advised to Speedwing Training. This

amount can be amended on consultation with your British Airways Account Manager.(cid:146)

(18)

It is to be noted that the business development fund includes direct staff incentives as eligible
expenditure. For instance, the provisions on direct staff incentives incorporated into the 1993/1994
MA with Thomas Cook are as follows:

(cid:145)15. Should British Airways wish to promote a specific national/local sales incentive directly or
indirectly to Thomas Cook staff. British Airways agrees that written consent must be obtained
from Thomas Cook before a promotion can be sent out to staff. Should this not happen
Thomas Cook reserve the right to withdraw the promotion.

16. As part of the retail Premier Selection programme British Airways agree for the duration of
this Agreement to continue to pay 0,25 per cent of sales to leisure staff through the Thomas
Cook Travel Trail Incentive Scheme. Payment to be made from the Marketing Fund allocation.(cid:146)

(c) C o n d i t i o n s

(19) BA’s MAs contain certain conditions relating to the promotion of BA’s products in a travel agent’s
office. In summary, they require that BA must be afforded a status which is no less favourable than
that given to any other carrier. For instance, the Standard MAs for 1995/1996 included the
conditions reproduced below. Similar provisions are included in all MAs.

(cid:145)21. All British Airways products shall be included in any preferred supplier list maintained by the

agent.

22. The agent must not enter into any activity which discriminates against the sales of British
Airways products or services. British Airways must therefore be afforded a status which is no
less favourable than that given to any other carrier.

23. Where applicable the agent will display in a position no less favourable than that given to any
other fare, throughout the year, the lowest return schedule fare of British Airways in your
automated (electronic) fares database accessible by its travel offices. The destinations will be
those covered by such databases.

4.2.2000

EN

Official Journal of the European Communities

L 30/7

24. The agent will give prominence in its promotions and displays to British Airways and British
Airways Holidays products such that they are drawn to its customers’ attention. These must
certainly be displayed in no less favourable position than that given to any other carrier.
Where window display facilities are available, the agent will commit to providing British
Airways with a minimum of two display opportunities per year in all its branches at times to
be mutually agreed.

25. Retail agencies will display British Airways scheduled timetables and all British Airways and
British Airways Holidays brochures must be racked by the agent at eye level in all outlets all
year round. These must certainly be displayed in no less favourable a position than that given
to any other carrier.(cid:146)

2. The global agreements

travel

to receive

(20) The arrangements with travel agents described in
paragraphs 7 to 19 relate to tickets purchased in the
United Kingdom. However, for the 1992/1993 winter
season, BA had arranged special global
incentive
programmes with three travel agents: American Express,
Rosenbluth, and Carlson Travel. These programmes
entitled these
additional
agents
commissions calculated by reference to the growth of
BA’s share in their world-wide sales. The arrangements
to the local agreements in particular
were additional
countries. If the travel agents achieved a minimum 1,5 %
increase in BA’s share of their overall international sales
in the markets specified in the agreements over the
winter period, BA rewarded the travel agent with 10 %
the incremental revenue represented by the share
of
increase. In addition, if the travel agent was willing to
drive the programme by means of a staff incentive, BA
provided the travel agent with an amount fixed in the
contract which was not even refundable in the event of
missing the growth target fixed in the contract.

3. The Performance Reward Scheme

(21) From 1976 to 1997, rates of BA’s standard commission
paid to travel agents
in the United Kingdom on
international flights and domestic flights remained static
at 9 % and 7,5 % respectively.

(22) On 17 November 1997 BA wrote to all United
Kingdom travel
revised
approach to the way in which BA will reward travel
agents’ sales performance. This new approach involved
two changes:

agents with details of

a

Secondly, BA announced its intention to implement
from 1 December 1997 a so-called Performance Reward
Scheme (PRS). BA explained that:
(cid:145)The PRS allows
agents the opportunity to earn rewards greater than the
reduction in standard commission on a performance
related basis(cid:146). This PRS is to be distinguished from the
(cid:145)performance reward(cid:146) paid to those travel agents with
whom BA had an MA.

(24) This new method of calculating commissions will apply
to all travel agents in the United Kingdom. Under the
in addition to the new standard flat
new approach,
commission rate of 7 %, each travel agent may earn an
additional commission of up to 3 % for international
tickets and up to 1 % for domestic tickets. The size of
the variable elements for domestic and international
tickets will depend on the travel agents’ performance
with BA. The
is
measured by comparing the
flown revenue
accruing to the BA Group on tickets issued by the travel
agent for travel on BA flights in a particular calendar
month to that achieved during the corresponding
month in the previous year. These supplementary
commissions are in addition to any other (cid:145)bonuses(cid:146)
under existing MAs.

travel agent’s performance level
total

(25) To calculate

the

variable

element,

additional

the
performance benchmark is 95 % of
the BA-related
turnover achieved in the corresponding month of the
previous year.
the travel agent’s performance is
greater than 95 %, the agent is entitled to the payment
of a variable element. The actual size of the variable
element increases in line with the performance achieved.

If

every travel agent, which determines

It is to be noted that although the actual performance
its
level of
qualification for the granting of the variable elements, is
and
calculated
for
domestic
international
calculated
separately.

combining
flown revenue,

the variable
revenue

element
is

international

domestic

both

and

by

(23) First, BA announced its decision to pay from 1 January
1998 a standard 7 % commission on all BA’s tickets sold
in the United Kingdom.

(26) The variable element

for international and domestic
tickets is a percentage of the respective international

L 30/8

EN

Official Journal of the European Communities

4.2.2000

and domestic reward revenue,
proportion of BA total
tickets issued using the BA identification plate.

this latter being the
flown revenue accruing from

Under the PRS, every percentage point of improvement
in the performance level over the 95 % benchmark earns
the travel agent a 0,1 % additional variable element to its
commission on international tickets above the standard
7 %. For sales of domestic tickets, the variable element is
0,1 % for every 3 % increase in sales over the 95 %
benchmark. The maximum variable element payable to
travel agents under the PRS is 3 % for international
tickets and 1 % for domestic tickets for a performance
level of 125 % or above in both cases.

(27) For example,

if

the international

the agent’s performance level

for a
particular calendar month is 112 %, the variable element
for international tickets will be 1,7 % ((112 minus 95) (cid:215)
0,1 % of
that
month. On the other hand, at that level of performance
the variable element for domestic tickets will be 0,5 %
((112 minus 95) (cid:247) 3 (cid:215) 0,1 %) of the domestic reward
revenue for that calendar month. Payments of the PRS
variable elements takes place every month.

reward revenue for

(30) An example will

a

total

giving

illustrate

commission

this effect of

ticket sales to a competitor of BA,

the BA
commission schemes. Assume a travel agent’s sales of
international air tickets amounted to GBP 100 000 a
month in the benchmark year. If the travel agent sells
GBP 100 000 worth of BA international air tickets a
month it will earn the basic commission of 7 % and a
(cid:145)performance reward(cid:146) of 0,5 % ((100 minus 95) (cid:215)
0,1 %) (7)
commission income on
international air ticket sales of GBP 7 500 (100 000 (cid:215)
If the travel agent diverted 1 % of its
(7 % + 0,5 %)).
its
international
(cid:145)performance reward(cid:146) would decrease to 0,4 % ((99
minus 95) (cid:215) 0,1 %) and this reduced rate would be
applied to all of the agent’s sales of BA tickets. The
agent’s
of
income
international BA tickets would drop to GBP 7 326
(99 000 (cid:215) (7 % + 0,4 %)). A reduction of GBP 1 000 in
sales of international BA tickets leads to a drop of GBP
174 in commission income. The (cid:145)marginal(cid:146) commission
rate can be said to be 17,4 %. In practical terms, this
means that a competitor to BA that could offer flights
that would replace GBP 1 000 of the travel agent’s sales
of BA tickets would have to offer a commission of
17,4 % on these tickets to compensate the travel agent
for its loss of BA commission revenue. Although BA
also has to offer this high marginal rate of commission
to increase its sales of tickets, it is at an advantage over
the new entrant who must offer this high rate of
commission on all of its sales. Also, the context of this
behaviour is BA seeking to maintain its position in a
relatively recently deregulated market where it should be
facing new competition.

from the

sale

(28) The PRS was intended to last until 31 March 1999. For
the month of December 1997, BA established a
transitional period of introduction. During that month,
the PRS was applied on top of the pre-existing standard
commissions of 9 % and 7,5 % for international and
domestic tickets respectively. On 8 February 1999, BA
announced that the scheme would not be renewed for
the year 1999/2000.

4. Common features of these commission schemes

(29) The commission schemes for travel agents described
above all have one notable feature in common. In each
case meeting the targets for sales growth leads to an
increase in the commission paid on all tickets sold by
the agent, not just on the tickets sold after the target is
reached. In the MA schemes the cash bonus per ticket
paid to the travel agent increases for all tickets sold. In
the PRS scheme
commission paid
the percentage
increases for all ticket sales by the travel agent. This
means that when a travel agent is close to one of the
thresholds for an increase in commission rate selling
relatively few extra BA tickets can have a large effect on
his commission income. Conversely a competitor of BA
who wishes to give a travel agent an incentive to divert
some sales from BA to the competing airline will have
to pay a much higher rate of commission than BA on
all of the tickets sold by it to overcome this effect.

This effect increases if the number of tickets in question
is a smaller percentage of the travel agent’s benchmark
sales of BA tickets. This effect is also increased if the
travel agent
in question is not only earning extra
commissions under the PRS but can also earn bonuses
under an MA.

D. MARKETS

1. Air travel agency services in the United

Kingdom

(31) Travel agents do not act as principals in the sale of air
tickets. They act as agents for the airlines, who assume
the risks and rewards of providing air travel
all of

(7) Following the formula reproduced in paragraph 26.

4.2.2000

EN

Official Journal of the European Communities

L 30/9

services and enter into contracts directly with travellers.
Agents publicise the services provided by airlines, help
travellers choose the appropriate services on what is
supposed to be an impartial basis, and undertake the
administrative work of issuing a ticket, collecting money
In
from the traveller and remitting it to the airline.
return for these services to the airlines, the airlines pay
the agents commissions based on the sales of tickets
made through the agents.

In summary,

(32) The essence of the service provided by a travel agent,
and its ability to attract members of the public is that it
can arrange travel by all means and via all carriers. To
this end the IATA system referred to below imposes
limits on the ability of an airline to refuse to deal with a
given agent (8).
IATA accredited agents
have certain rights of appeal against an airline’s decision
not to deal with them. It should also be noted that if an
airline has a powerful position in a given market, a
travel agent operating in that market will not only have
to deal with that airline but will also find that a large
portion of the air tickets it sells are inevitably for that
airline. As a result the commissions paid by that airline
constituting a major part of the agent’s income from all
airlines. Even if the agent wished to deal in the tickets
of other
income would be
significantly affected by the type of commission offered
by the powerful airline.

airlines,

agent’s

the

(33)

In 1995 there were approximately 7 000 travel agents
in the United Kingdom. The largest and most important

of them are agents participating in the IATA Billing and
settlement plan United Kingdom ((cid:145)BSPUK(cid:146)). The total
number of agents participating in BSPUK is 4 634. Of
these, 4 108 are IATA accredited agents that can sell
tickets for international scheduled air transport under
the IATA passenger agency programme. The remaining
526 agents in the BSPUK are agents that only sell air
transport within the United Kingdom. The travel agents
outside
scheduled air
transport on the basis of an individual agreement with
an airline.

the BSPUK could only sell

(34) On average, according to ECTAA, the European industry
association for travel agents, 70 % of air tickets in
Europe are currently sold through travel agencies. In the
United Kingdom an average of 80 to 85 % of air tickets
are currently sold through travel agents, according to
the estimates of ABTA, the United Kingdom industry
association for travel agents (9). The remainder are sold
through the airlines’ own offices. For example, BA’s
sales of tickets in the United Kingdom were GBP 2 911
million for the period January to November 1998, of
which GBP 2 479 million (85 %) were sold through
IATA travel agents and transacted through BSPUK (10).

(35)

In 1992 the sales of BA’s tickets through IATA travel
agents accounted for 66 % of the sales of the top 10
airlines transacted that year through BSPUK. In 1998
the GBP 3 276 million of BA’s sales transacted through
BSPUK accounted for 57 % of BSPUK sales of the top 10
airlines selling through BSPUK in that year.

(36) BA’s shares of total sales through the BSPUK in the years 1992 to 1998 were as set out below:

Year

1992

1993

1994

1995

1996

1997

1998

Total BSPUK sales (GBP million)

4 235

4 709

5 420

5 877

7 369

7 885

8 246

BA’s BSPUK sales (GBP million)

1 961

2 149

2 357

2 508

2 970

3 311

3 276

BA’s share (%)

46,3

45,6

43,5

42,7

40,3

42,0

39,7

(8) Commission Decision 91/480/EEC,

IATA Passenger Agency

Agents to the Commission.

Programme (OJ L 258, 16.9.1991, p. 18), paragraph 38.

(10) Letter of 20 April 1999 from BA to the Commission.

(9) Letter of 19 April 1999 from The Association of British Travel

L 30/10

EN

Official Journal of the European Communities

4.2.2000

(37) BA’s share of airline sales through the 10 largest travel agents is set out below: (11)

Travel agent

BA gross revenue
(GBP million)

Total BSP gross revenue
(GBP million)

BA share 1997/1998
(%)

American Express UK

Hogg Robinson

Carlson Wagonlit

Carlson Worldchoice

Going Places TVL Ltd

Thomas Cook

Brittanic Travel

P & O Travel

Portman Travel Ltd

The Travel Company

Totals

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

[(cid:133)] *

2. Passenger air transport to and from the United Kingdom

(38) BA offers more flights on the routes to, from and within the United Kingdom than any other

airline.

in 1994 there were 10,7 million
As regards domestic services, according to CAA estimates,
domestic passengers in the United Kingdom, of which 5,9 million on routes to or from London
airports and 4,8 million on other domestic routes. The share of United Kingdom domestic
passengers carried by BA was 60,6 % on London routes and 22,4 % on other domestic routes,
which makes a global market share of 46,5 % in the total United Kingdom domestic market.

As regards international routes, in July 1995 there were 151 routes operated from Heathrow and
92 from Gatwick. The number of routes operated by BA was 92 and 43, respectively. Its three
nearest competitors operated 11, 10 and 9 routes, respectively, from Heathrow, and 4, 4 and 4,
respectively, from Gatwick.

In winter 1998 BA held 38 % of the weekly slots available at Heathrow. Its nearest competitor
accounted for only 14 % of the total. BA’s five nearest competitors together totalled only 27,42 %.

(39) According to the International Passenger Survey (IPS), in 1994 BA accounted for respectively 40 %
and 21 % of the 37,9 million passengers and 18,6 million passengers of international traffic at
Heathrow and Gatwick.

(40) This gave BA a share of 34 % of international traffic from Heathrow and Gatwick.

(41)

In 1998 total sales of all airlines in the United Kingdom transacted through BSPUK amounted to
GBP 8 245 million of which BA accounted for GBP 3 276 million (39,7 %).

(11) NERA report presented by BA on 28 April 1999.

4.2.2000

EN

Official Journal of the European Communities

L 30/11

The table below sets out the shares of the top five United Kingdom airlines ranked by sales volume
through IATA BSPUK over the period 1992 to 1998.

1992

1993

1994

1995

1996

1997

1998

British Airways

46,3

45,6

43,5

42,7

40,3

42,0

39,7

American Airlines

Virgin

British Midland

Qantas

KLM

5,4

3,0

3,4

2,7

(cid:151)

7,3

3,7

3,2

3,0

(cid:151)

7,7

4,0

3,0

2,6

(cid:151)

7,6

4,0

2,7

6,4

(cid:151)

3,6

5,8

(cid:151)

3,0

3,8

3,8

5,5

(cid:151)

3,3

5,3

2,8

3,6

3,0

2,5

It should be noted that, as the IATA BSPUK represents a large proportion (about 85 %) of total
scheduled air ticket sales in the United Kingdom, there is no reason to consider that the overall
shares of the abovementioned airlines in total scheduled air ticket sales,
including sales by the
airlines’ own offices, differs significantly from those reported through the BSPUK.

(42) The products in question are flights to and from United Kingdom airports. This group contains
several different product markets defined by the origins and destinations of passengers’ journey and
the extent to which the passengers are time-sensitive or price-sensitive. For example non-stop, fully
flexible business tickets from Heathrow to a major business centre like New York will constitute a
separate product market as the business people who purchase such tickets would only consider
substituting a similar London-New York ticket for their journey. At the other end of the scale, a
restricted, advance booked economy tickets from London to Paris could be part of a wider product
market. Non-time-sensitive and price-sensitive leisure travellers will consider alternative means of
travelling to Paris, and many of the tickets might be sold to non-time-sensitive travellers making a
lengthy but economical
journey to a point beyond Paris who would also consider another
stopping-off point.

(43) All of these separate products are sold on several geographic markets, principally at each end of the
route in question but also elsewhere when the ticket is being bought as part of a journey including
stops. BA sells these products in the United Kingdom through United Kingdom travel agents
subject to the arrangements described above, and these transactions are all settled through the
BSPUK mechanism of IATA. BA’s competitors in the United Kingdom would also sell through these
distribution channels applying the same conditions to sales to United Kingdom residents.

E. THE MAIN ARGUMENTS OF THE PARTIES

1. Virgin

also concerned
above. Virgin’s original
discount arrangements between BA and large corporate
customers. These are not dealt with in this Decision.

complaint

(44) Virgin’s original complaint on 9 July 1993 was based
on the incentive schemes for travel agents described in
sections C.1 and C.2 above. Virgin’s supplementary
complaint on 9 January 1998 was based on the
(cid:145)Performance Reward Scheme(cid:146) described in section C.3

(45) Virgin alleged that the discount arrangements between
corporate
BA and both travel
customers were
as
(cid:145)requirements contracts(cid:146) and of Article 82 as attempts by
a dominant firm, BA, to foreclose some of the market

in breach of Article 81(1)

and large

agents

L 30/12

EN

Official Journal of the European Communities

4.2.2000

or markets
Kingdom from its competitors.

for air

travel

to and from the United

2. The Commission’s Statements of Objections

corporate

(46) The Commissions initial Statement of Objections issued
on 20 December 1996 argued that BA was dominant
on both the United Kingdom market for travel agency
services and the United Kingdom markets for air travel
travel. This
customers on business
for
Statement of Objections criticised BA’s arrangements
with both travel agents and corporate customers. The
Commission’s supplementary Statement of Objections
restated and updated the Commission position on
dominance and criticised the PRS scheme for travel
agents as being abusive of a dominant position. This
Decision does not
arrangements with
cover BA’s
corporate customers.

Dominance

(47) The Commission’s Statements of Objections state that
BA is dominant on the United Kingdom market
for
travel agent services on the basis of:

(i)

(ii)

structural position of offering the

flights

in and out of

largest
the United

its
selection of
Kingdom,

its share of total sales of air travel in the United
Kingdom and hence its share of the purchases of
air travel agency services,

(iii)

its share of the markets for the sale of air travel
and purchase of air travel agency services relative
to the share of its competitors,

(iv)

the fact that it is an obligatory trading partner for
travel agents wishing to offer a full service to their
customers.

Abuse in arrangements with travel agents

exceeds its own previous year’s sales of BA tickets and
not on the size or efficiency of the travel agent or the
services provided to BA by the travel agent. Therefore,
they are not related to any cost saving or efficiencies
realised by BA in its dealing with travel agents. In fact,
the Commission was not aware of any cost saving or
efficiencies for BA when a travel agent sold a large
number of tickets. On this basis, the Commission took
the commissions given discriminated
the view that
between travel agents.
these
In addition, because of
features of the schemes, that is the fact that the extra
discounts were awarded on an increasing scale so giving
them a very large effect at the margin and the fact that
the effect would increase from year to year if an agent
increased its sales of BA tickets, the Commission took
the view that they were illegal (cid:145)exclusionary(cid:146) commission
schemes. The additional benefits and cash payment
made under some of the commission schemes for travel
agents had the effect of reinforcing the discriminatory
and exclusionary effect of the schemes.

3. BA’s responses to the Statements of Objections

(49) BA made the following responses to the Commission’s

Statements of Objections:

(i)

a written response to the Commission’s Statement
of Objections on 27 March 1997;

(ii)

a supplementary memorandum of 15 October
1997;

(iii) oral presentations at
November 1997;

the oral hearing of 12

(iv) at the oral hearing of 12 November 1997 a paper
prepared by Professor Robert S. Pindyck of MIT, at
the
the
request
Commission;

of BA was

presented

to

(v) BA’s response to the Commission’s supplementary

Statement of Objections of 20 May 1998;

(vi) at a meeting on 28 April 1999, BA presented a
request by National

their

report prepared at
Economic Research Associates;

(48) The Commission’s Statements of Objections argue that
BA’s commission arrangements with travel agents are
abusive of a dominant position. The extra commissions
are based on the extent to which a travel agent meets or

(vii) miscellaneous letters between May 1998 and April

1999.

4.2.2000

EN

Official Journal of the European Communities

L 30/13

(50) BA made a large number of factual and legal arguments
relating to questions of market definition, determination
of dominance,
the
law for this case and questions
applicable procedural
the Commission in
relating to the obligations of
to proceed with this case.
deciding whether or not
These arguments are summarised below.

the finding of abusive behaviour,

BA’s arguments on market definition

(53) BA argues that the supply of travel agency services by
travel agents to air carriers is not a properly defined
product market. It bases this opinion on the following
factors:

BA’s arguments on general obligations of the Commission

(51)

airlines

In its responses to the Commission’s Statements of
Objections, BA has drawn the Commission’s attention
to incentive schemes operated by other European
airlines for travel agents and large corporate customers.
These schemes, which are now the subject of separate
cases arising from complaints by BA against a number
of European airlines, may be similar to the schemes to
which the Commission has objected in this case. BA has
argued that for the Commission to proceed against it
before taking action against these schemes operated by
other
the
Commission. BA argues that this discrimination is in
breach
the
Commission. BA also argues that to proceed against its
incentive schemes before acting on schemes operated in
other European countries where BA sells its tickets
would worsen the overall state of competition on the
relevant markets. BA has suggested that, rather than
some form of
proceeding with an individual case,
general legislation, applicable to all EEA airlines, such as
that governing computerised reservation systems (12)
should be adopted by the Commission.

discrimination

fundamental

obligations

represents

legal

by

of

of

(i)

(ii)

travel agents also provide other services such as
hotel reservations and car hire (cid:145)interwoven(cid:146) with
their air transport activity. BA describes this as
giving rise to supply side substitutability and hence
widening the relevant product market definition;

travel agents are not a (cid:145)clearly delineated class(cid:146), for
example some are vertically integrated with tour
operators. BA claims that this gives rise to what it
refers to as supply side substitutability, and that
this changes the definition of a relevant market;

(iii) BA points out that the travel agents also provide
agency services to charter airlines, and that this
activity is not included in the market data relied on
by the Commission. BA estimates that up to 50 %
of air journeys out of the United Kingdom sold to
United Kingdom residents may be charters, and
that
to
the provision of agency type services
charter operators should be included in the market;

(iv) BA refers to the fact that passengers do not only
buy air tickets from travel agents but also buy
them directly from airlines by phone or using the
it states, should also change the
Internet. This,
Commission’s market definition;

BA’s arguments on applicable procedural law

(v) BA argues that since the practices at issue concern
the distribution of air transport the relevant market
should be that for air transport;

(52) For

reasons developed further below BA does not
believe that the provision of air travel agency services in
the United Kingdom constitutes a valid market.
It
therefore argues that its commission schemes for travel
agents are only relevant to a market for (cid:145)the sale of air
transport through travel agents(cid:146) and so fall outside the
scope of Regulation No 17.

(vi) BA alleges that by not applying the (cid:145)SSNIP(cid:146) (small
but significant and non-transitory increase in price)
the Commission has
test
departed from its own guidelines on market
definition.

for defining markets

(12) Commission Regulation (EC) No 3652/93 of 22 December 1993
the Treaty to certain
on the application of Article 85(3) of
categories of
relating to
agreements between undertakings
computerised reservation systems for air transport services (OJ
L 333, 31.12.1993, p. 37).

(54) BA argues that since many travel agents operate in
more than one Member State the geographic market for
air travel agent services must be wider than just the
United Kingdom.

L 30/14

EN

Official Journal of the European Communities

4.2.2000

BA’s arguments on dominance

schemes which have the effect of forcing a customer to
take all or most of its requirements from the dominant
supplier.

(55) With respect to the market for air travel agency services

BA argues as follows:

(i)

BA has an obligation under IATA rules to deal
with all travel agents, so reducing BA’s power with
respect to travel agents.

(ii) Unlike the situation in markets for physical goods
travel agents do not hold a (cid:145)stock(cid:146) of BA flights and
so, BA argues, cannot be prevented or discouraged
from promoting other airlines’ tickets.

(iii) Following on from its arguments about (cid:145)supply-side
substitution(cid:146) by travel agents BA argues that these
other revenue-producing activities of travel agents
prevent BA from being able to enjoy a position of
dominance with respect to them.

for air

transport

to the Commission’s

findings on the
(56) With respect
markets
to and from the United
Kingdom, BA makes a number of arguments as to the
In
intensity of competition in the airline industry.
particular it draws attention to the success of new
entrants such as Virgin, and to an alleged ease of entry
into the market.
It provides market share figures for
individual routes in and out of the United Kingdom
these
where BA competes with Virgin. On some of
routes Virgin
of
outsells
point-to-point traffic. BA also points out that it acts as a
(cid:145)General Sales Agent(cid:146) for a number of airlines. Sales of
tickets for these airlines may be included in the BSP
for BA sales. These figures may therefore
figures
overstate BA’s market
share. BA estimates, without
providing any basis, that up to five percentage points of
the share shown by the BSP figures may be accounted
for by these sales of other airline’s tickets.

BA in

terms

even

(58) BA has also provided evidence that there may be some
cost savings for BA in selling its tickets using an agency
that generates a large volume of business. BA argue that
certain costs of dealing with an agency are either fixed
regardless of the size of the agency or do not increase
directly in proportion to the volume of business done
by an agency, so realising cost savings for BA in dealing
with larger
example of
marketing and communication costs such as brochure
production and product education, operational costs of
checking and
processing enquiries
and
inputting
communicating
and
commercial cost of entering into and managing a
contractual relationship with an agency. The majority of
these savings arise from dealing with a chain of travel
agencies rather than a single-location travel agent.

agency
from an
information to agencies

agencies. They give

from agencies,

received

orders

fare

the

(59) BA attempts

to use

the Commission a
against
preliminary opinion by
the
a
institution that it was not sufficiently obvious that these
discounts might be in breach of Article 82 to justify the
grant of interim measures (15).

senior official of

(60) BA also argues that discounts promoting extra sales
have efficiency benefits, that the discount schemes in
eliminating
question have not had the
effect of
competition,
they are common practice in the
that
airline industry, and that other airlines can match the
effect of these discounts. In the opinion of BA, these
factors mean that
the discounts in question are not
abusive.

BA’s arguments on abusive behaviour

(57) BA argues that although the judgment of the Court of
Justice of the European Communities in the Michelin
case (13) condemned a discount scheme operated by a
dominant supplier not based on an economic service
justifying it, that this should be (cid:145)read in the context of
Roche(cid:146) (14) and considered only to apply to discount

(61) BA has provided evidence that

there are in fact
efficiency benefits for it if a travel agent sells a large
number of BA tickets. BA has provided evidence that
certain costs of selling tickets through travel agents are
less per ticket if the tickets are sold via a large chain of
travel agents or chain of agencies rather than through a
small agency. The costs where these (cid:145)economies of scale(cid:146)
exist are operational costs such as: query processing,
from the agency,
production and checking reports
distribution of fare information to agencies and certain
operational costs such as query processing.

(13) Case 322/81 Michelin [1983] ECR 3461.
(14) Case 85/76 Hoffmann-La Roche [1979] ECR 541.

(15) Letter to Ms Frances Farrow of Virgin on 24 September 1993.

4.2.2000

EN

Official Journal of the European Communities

L 30/15

(62) Efficiencies can also be realised in commercial costs
such as managing the relationship with the agency, and
marketing and communication costs
the
production and mailing of promotional material and
product education.

such as

(63) BA has argued that the Commission has only shown an
effect on BA’s competitors and not on consumers and
that this is not enough to establish abuse.

(64) BA has argued that there are ways for travel agents and
competing airlines to minimise the effects of
these
commission schemes and that, despite these commission
schemes, competing airlines have been able to take
market share from BA. On this basis, it argues that the
commission schemes do not have enough effect to be
considered abusive.

II. LEGAL ASSESSMENT

A. GENERAL OBLIGATIONS OF THE COMMISSION

(65) As noted in recital 51, BA has argued that

the
Commission is in breach of a general obligation of
non-discrimination in pursuing this investigation. It is
true that the Commission will have to apply the same
standards to incentive schemes operated by other air
transport firms as it has to the schemes operated by BA.
If, on investigating the complaints referred to in recital
51, the Commission finds that comparable practices to
BA’s are being carried out by firms in a comparable
position to BA, then it will treat these in the same way
as BA’s current practices are being treated. It should be
noted that this decision arises from a complaint made
by Virgin in 1993. The complaints referred to in recital
51 were made in 1998.

(66) However,

the Commission is not

required to take
the same time. The
decisions on similar cases at
Commission has a discretion to allocate its
scarce
resources to the many potential cases that exist, so as to
achieve its public policy goals (16). One way of doing
this is to establish precedents by taking leading cases.
For example, in a long line of decisions the Commission
has condemned manufacturers who seek to partition the

Community market by granting absolute territorial
protection to their distributors, and in particular it has
always insisted that exclusive distributors should be able
to meet unsolicited orders from outside their assigned
territories (17).
the
these cases
Commission should have delayed any of
until it had identified all of the similar practices taking
place in a given industry, and taken action against them
all simultaneously.

It has never been suggested that

increase

competition on the

engaged in similar practices

(67) A related argument has been made that it would be
discriminatory to proceed with this decision while BA
still faces competition in other geographic markets from
air carriers
in those
geographic markets. Bringing an end to abusive
behaviour in the United Kingdom geographic market
relevant United
will
Kingdom markets, so benefiting consumers. The state of
competition in other geographic markets will be
unchanged, leaving consumers there no worse off. The
only way a decision relating to the United Kingdom
market would reduce the extent of competition on other
markets where BA also operates would be if it had the
effect of driving BA out of business, and so out of these
markets. BA has not suggested that
this is even a
possibility. A decision bringing abuses to an end in the
United Kingdom market
therefore has only positive
effects, and cannot be considered as having a distortive
effect on competition.

B. APPLICABLE REGULATIONS

(68) This decision is concerned with BA’s behaviour on the
United Kingdom market for air travel agency services.
This activity has been treated as a separate product from
air transport (18). As such it falls outside the scope of
application of Council Regulation (EEC) No 3975/87 (19)
which applies only to (cid:145)air transport between Community
airports(cid:146) (20). The
regulation is
therefore Regulation No 17. This
situation can be
distinguished from the recent UIC case (21) where the
Court of Justice found that the applicable regulation was

relevant procedural

(17) For example, the long line of prohibition decisions starting with
Joined Cases C-56 and 58/64 Consten & Grundig v. Commission
[1966] ECR 299.

(18) See note 8, IATA Passenger Agency Programme.
(19) Council 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, (OJ L 374,
31.12.1987, p. 1).
(20) See Article 1 thereof.
(21) Case C-264/95 P Commission v. Union internationale des chemins

(16) Case T-24/90 Automec II [1992] ECR II-2223.

de fer [1997] ECR I-1287.

L 30/16

EN

Official Journal of the European Communities

4.2.2000

Council Regulation (EEC) No 1017/68 (22). The scope of
Regulation (EEC) No 1017/68 is defined more broadly
than that of Regulation (EEC) No 3975/87. The relevant
part of Regulation (EEC) No 1017/68, which the Court
interpreted to include travel agency services refers to (cid:145)all
agreements, decisions and concerted practices which
have as their effect the fixing of transport rates and
conditions, the sharing of transport markets, (cid:133)(cid:146) (23).

are not

the airline tickets. In the airline industry these services
are purchased by airlines from travel agents, as travel
traditional distributors who take
agents
ownership of products and sell
them for their own
account. More recently airlines have started to increase
tickets directly, particularly using
their efforts to sell
modern communication methods such as the Internet,
and have started to perform these services (cid:145)in-house(cid:146) as
an alternative to purchasing air travel agency services
from travel agents. However, as noted in recital 34,
some 85 % of airline tickets are still sold through travel
agents.

C. RELEVANT MARKETS

consumer, by reason of

(69) For the purposes of Community competition law (cid:145)a
relevant product market comprises all those products
and/or services which are regarded as interchangeable or
substitutable by the
the
products’ characteristics, their prices and their intended
use (cid:133) the relevant geographic market comprises the
area in which the undertakings concerned are involved
in the supply and demand of products or services, in
which the conditions of competition are sufficiently
homogeneous and which can be distinguished from
neighbouring
of
because
competition are appreciably different in those areas(cid:146) (24).

conditions

areas

the

(72) This practice in the air transport

travel

rather

in air

industry creates a
market
services, which are
agency
purchased from travel agents by airlines. The fact that
airlines are increasing their efforts to perform these
activities themselves, in effect to perform these services
(cid:145)in-house(cid:146)
travel
agents, does not alter the fact that this is a distinct
market. There are many markets where customers have
their
the option of producing
requirements for a product themselves. This does not
these
prevent
products, but does affect
the
various suppliers and purchasers.

relevant market
the market power of

than buying the services of

these being a

some or

all of

for

(70) The Commission has provided detailed guidance on
how it applies this principle in practice in its Notice on
market definition (25). The Notice describes how the
product
Commission
characteristics, evidence of past substitution and so forth
to define a product market. The Notice mentions the
idea of a hypothetical price rise but does so to explain
the concept of a relevant market.

information

about

uses

these,

(73) Travel agents provide services other than the services
related to the marketing and distribution of tickets that
they provide to airlines. Several of
such as
booking hotels and cars, may be provided at the same
time as the selling of air tickets. Travel agents may also
provide similar services to charter airlines. BA has stated
that
sometimes
performed by vertically integrated tour operators. BA
feels that these factors indicate that there is (cid:145)supply side
substitutability(cid:146) between air travel agency services and
other services provided by travel agents and/or tour
operators, and that
the appropriate
market definition should be broader than air travel
agency services.

this means that

services

agency

travel

these

are

1. The market for air travel agency services

(71) As was outlined in recitals 31 to 37, for airlines to
operate, a number of other
services have to be
performed related to the marketing and distribution of

(22) Council Regulation (EEC) No 1017/68 of 19 July 1968 applying
road and inland

rules of competition to transport by rail,
waterway, (OJ L 175, 23.7.1968, p. 1).

(23) See Article 1 thereof.
(24) See Commission Notice on the definition of the relevant market
for the purposes of Community competition law,
(OJ C 372,
3.12.1997, p. 5), which quotes these definitions from Form A/B
and Form CO.
(25) See footnote 24.

(74) The proper treatment of supply side substitutability in
Community
competition law is discussed in the
Commission’s Notice on market definition (26). The
example given in the Notice is the paper industry. The
Notice observes that paper producers produce a wide
these different
range of qualities of paper, and that
qualities of paper are not substitutable in the hand of
users. However, the Notice points out that since any
paper producer can easily produce any grade of paper
they all compete with each other in the production and
supply of all grades of paper. In these circumstances the
different grades of paper can be grouped together into
one market.

(26) See footnote 24.

4.2.2000

EN

Official Journal of the European Communities

L 30/17

(75)

It is not appropriate to aggregate the different services
into a single market
performed by travel agents
definition as BA has claimed in seeking to rebut the
Commission’s market definition. First, the travel agents
are not free to decide to concentrate on one service or
another as in the example of paper manufacturers. It is
in the nature of travel agency services that travel agents
have to offer all of these services. A travel agent cannot
replace its activity in air travel agency services with
other activities. This is particularly clear in this case
where, as is set out below, a powerful buyer of these
services is in a dominant position despite the fact that
the travel agents also sell other services.

(76) Secondly, it is not appropriate to aggregate the different
services provided by travel agents into a single market,
as BA argued the Commission should,
since these
different services are provided under different conditions
of demand and supply. Travel agents do provide air
travel agency services both to charter airlines and to
the charter airlines are
scheduled airlines. However,
from the scheduled
operating in a different market
airlines. The only potential overlap is
the possible
substitution of (cid:145)seat only(cid:146) charter flights for scheduled
flights by a travel agent’s customers. This theoretically
gives the travel agent a choice between providing the
same agency services to a scheduled or a charter airline.
However this does not arise in practice to a material
extent in the United Kingdom as charter airlines operate
almost entirely for tour operators and do not provide
alternatives to scheduled flights through travel agents to
an appreciable extent (27).

(77)

In addition, as noted in recital 68, the Commission has
in the past recognised that air travel agency services
form a separate product market where services are
provided by travel agents to airlines (28).

tend

agents

residence.

country of

operate within

(78) The relevant geographic market is the United Kingdom.
Travel
national
to
boundaries, since customers normally book tickets in
their
case,
customers residing in the United Kingdom purchase
their tickets from travel agents in the United Kingdom;
transactions are generally made in pounds sterling; and
travel agents operate on the basis that the markets they
are serving are delineated on national boundaries. The
carriers therefore market their services and purchase air
travel agency services within the same boundaries.

In the present

(79) Although BA has pointed out that some of the travel
agents with which it deals operate in more than one
Member State, BA is able to apply different conditions
to its purchases of air travel agency services in the
United Kingdom from those it applies elsewhere. BA has
consistently applied different conditions to its purchases
of air travel agency services in the United Kingdom
from its purchases outside the United Kingdom. In fact
BA purchases
on a
country-by-country basis, even when it deals with a
travel agency with operations in more than one Member
State. The MAs and the PRS described at sections I.C.1
and I.C.3 above apply only to sales in the United
Kingdom, even where they are entered into with a travel
agent with operations in more than one Member State.
travel agents
incentive schemes
BA applies
uniformly throughout the United Kingdom.

services

agency

travel

for

air

its

2. Air transport markets

(80) BA is active in the provision of air transport to and
from points in the United Kingdom. The behaviour
complained of has its effects on the market or markets
for this air transport. Each of the routes served by BA is
potentially a separate product market. To determine
whether a given scheduled route does constitute a
separate market the Court of Justice has stated: (cid:145)The test
to be employed 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
interchangeable with those
alternatives and is affected only to an insignificant
degree by competition with them(cid:146) (29).

is not

(81) Applying this test to the flights offered by BA identifies
a large number of product markets for air transport to
and from the United Kingdom. Non-time-sensitive
passengers, and in particular
those who wish to
complete their journey at the lowest possible cost will
have several viable alternatives to a given BA flight
to a different
between two points. They may travel
airport to start their journey, they may complete their
journey by flying to an intermediate airport or airports
and connecting with another flight on to their eventual
destination. They may even consider alternative modes
ferries or combinations of
of
these. Time-sensitive passengers who can complete their
journey by taking a direct
from their nearest
airport will be in a different situation. These passengers
will not be prepared to take the extra time required to
to other
make stops on their journeys and connect
flights. Unless an alternative non-stop, speedy means of

transport such as rail,

flight

(27) CAA report CAP 685 (cid:145)The Single European Aviation Market: The

First Five Years(cid:146) 6/98, point 70 et seq and Appendix D.

(29) Case 66/86 Ahmed Saeed Flugreisen [1989] ECR 803, paragraph

(28) See footnote 8.

40.

L 30/18

EN

Official Journal of the European Communities

4.2.2000

transport exists to their destination, such as for those
passengers travelling from London to Paris or Brussels
who may be able to substitute the Eurostar for a direct
flight, these passengers will only consider direct flights
from their nearest airport to their destination as being
interchangeable.

substantial part of the common market (30). In addition,
these abuses will also have an effect on the markets for
air transport to and from points in the United Kingdom.

(82) The flights operated by BA are sold on a variety of
product markets depending on the needs of passengers
and the alternative modes of
transport available. On
some of these product markets BA will face competition
from alternative modes of
transport and alternative
routes to complete a given journey by air. On the
lucrative business market a BA flight between two
points may only face competition from the direct flights
between these two points offered by other airlines.

(83)

IATA rules on the sequential use of coupons (the
individual portions of an air ticket) allow airlines to
apply different conditions to a journey from the United
Kingdom to a point outside the United Kingdom and
back, to the conditions applied to a journey made using
the same flights but originating outside the United
Kingdom. The IATA rule prevents arbitrage between the
two markets by buying tickets for journeys originating
outside the United Kingdom, separating these into their
constituent parts and re-packaging them as journeys
originating inside the United Kingdom. The relevant
geographic market for air transport is therefore, at most,
UK wide. BA sets prices and conditions for its tickets
the United Kingdom using the
uniformly throughout
IATA BSPUK and publicises
the
United Kingdom on computerised reservation systems.
the relevant
The United Kingdom therefore forms
geographic market
the set of products
referred to in recital 82.

these throughout

for each of

(84) This case is based on a dominant position enjoyed by
BA on the United Kingdom market for air travel agency
services, so its position on each of the many product
markets
to and from the United
Kingdom is not examined. Its aggregate position on all
of these markets is as set out in section I.D.2 above.

transport

for air

D. SUBSTANTIAL PART OF THE COMMON MARKET

(85) BA enjoys a dominant position and carries out

the
abuses described above on a United Kingdom-wide
market for air travel agency services. This market is a

E. DOMINANCE

(86) The Court of Justice has defined a dominant position as
being a position of economic strength enjoyed by an
undertaking which enables
effective
competition being maintained on the relevant market by
the power to behave to an appreciable
affording it
extent independently of its competitors,
its customers
and ultimately of consumers (31).

to prevent

it

(87) A combination of factors can lead to the conclusion
that a firm enjoys a dominant position, although market
share is the most direct indicator. This point was made
by the Court of First Instance in CMB v. Commission
where it stated that (cid:145)a dominant position may be the
considered
result of a number of
separately, would not necessarily be determinative(cid:146) (32).

factors which,

(88)

Its nearest rival

In 1998 BA had a share of 39,7 % of United Kingdom
sales through travel agents.
(Virgin)
accounted for only 5,5 % of sales of air travel. BA’s
market share was over 2,2 times the combined share of
its four largest rivals in 1998. This position has been
maintained for several years. In 1992 BA’s share was as
high as 46,3 % compared with 3,6 % for its nearest rival.
This was over 3,9 times the combined share of its four
largest rivals.

(89) BA has argued that

the BSPUK figures for BA sales
include some sales of other airlines for which BA is a
sales agent or
franchise partner, where the airline
concerned issues a ticket using BA ticket stock or BA’s
plate. They have not quantified this amount, merely

(30) Cf. Case C-179/90 Porto di Genova [1991] ECR I-5889, where the
market for dock services in one Italian port was considered to
form a substantial part of the common market since that port
accounted for a substantial part of the trade of one Member State.

(31) Case-85/76 Hoffmann-La Roche, cited in footnote 14.
(32) Joined Cases T-24/93, T-25/93, T-26/93 and T-28/93 Compagnie
Maritime Belge Transports and Others v. Commission [1996] ECR
II-1439, at paragraph 76.

4.2.2000

EN

Official Journal of the European Communities

L 30/19

these sales

stating that it could be as high as 5 %. There is no
should be
indication of which airlines
attributed to, or the extent to which a similar situation
arises with the other airlines in the BSPUK. Because of
this it can be assumed that the BSPUK figures correctly
the various airlines
show the relative position of
operating in the United Kingdom. These sales do not
count towards thresholds in the MA or PRS schemes,
nor do they give rise to payments under the MA or PRS
schemes. However,
they do involve a travel agent
earning basic commission by issuing a ticket on BA
ticket stock or using a BA plate which is processed
through the agent’s BSPUK account with BA.

dominant is the fact that travel agents are in a situation
where an extremely large proportion of the air tickets
they sell will be BA tickets, and hence a similar
proportion of their sales of air travel agency services
will be to BA. This allows BA, in its purchases of air
travel agency services, to act independently of the other
airlines who purchase
services.
air
Regardless of the conditions on which BA buys these
services from travel agents, agents have to deal with BA
and accept that a large portion of their income from
these services will be that generated by the sale of BA
tickets.

agency

travel

(90) BA is the dominant purchaser on the United Kingdom
market for air travel agency services. Its position on the
United Kingdom markets for air travel gives it a unique
position of dominance with respect to United Kingdom
travel agents from which it buys air travel agency
services.

(93) This overall statistic including all travel agencies and all
airlines may conceal the extent of BA’s influence in key
areas. In 1998 BA accounted for 39,7 % of all air ticket
sales through travel agents, but 57 % of sales by (cid:145)top 10(cid:146)
airlines. In 1998 BA accounted for 43,7 % of the sales
of air tickets through the 10 largest travel agents in the
United Kingdom.
a
particularly powerful position relative to its leading rival
airlines, and with respect to the most important travel
agencies.

In other words, BA enjoys

some of

the main points:

(91) BA’s dominance arises from its position on the United
Kingdom markets for air travel. As described in section
I.D.2, BA is extremely successful on these markets. To
summarise
it offers
to and from the United
significantly more routes
Kingdom than any other airline. The level of BA’s
success on the markets represented by these routes is
shown by the fact that in 1998 it accounted for 39,7 %
of all United Kingdom sales of air travel through the
settlement scheme for travel agents operated by IATA.
As well as being large in absolute terms, this share is a
multiple of that of any other airline.

that

for air

airports

relevant

and by

currently

transport

the
exists

BA’s position on the markets
is
reinforced by the substantial proportion of slots it holds
system of
in the
grandfathering
their
for
reallocation. This
system hampers new entries and
therefore strengthens the position of well-established
airlines like BA. For instance, in winter 1998 BA held
38 % of
Its
nearest competitor accounted for only 14 % of the total.
BA’s five nearest competitors together
totalled only
27,4 %.

the weekly slots available at Heathrow.

(92) BA’s position on the markets for air transport make it
an obligatory business partner for travel agents. As BA
has pointed out, the IATA passenger agency programme
may oblige it to deal with all travel agents who meet
certain objective criteria. However what makes BA

(94) The extent to which travel agents are obliged to deal
with BA is shown by the statistics in section I.D.2
above. In 1998, BA accounted for 39,7 % of all sales of
air tickets through travel agents. As indicated in recital
41, this is a multiple of the volume represented by any
other airline.

(95) This has allowed BA to behave in the manner described
above, that is to agents in a situation where they may
lose commission income by selling a ticket from a BA
competitor unless that competitor pays a commission
on the ticket which is a multiple of that paid by BA. BA
points out that agents do not hold (cid:145)stocks(cid:146) of tickets or
have to devote scarce storage or display space to tickets
as do distributors of physical goods, and argues that
they are not under pressure to sell BA tickets rather
It is clear from the
than those of BA’s competitors.
operation of these discount schemes as described above,
and analysed under section F below, that BA has been
able to place even more direct pressure than this on
travel agents not to deal in non-BA air tickets. As noted
above, the fact that travel agents provide other services
than the air travel agency services provided to BA does
not prevent BA from exerting power over the agents in
the market for air travel agency services. Travel agents
have not, and could not have, responded to BA’s new
discount
schemes by concentrating their efforts on
booking hotel rooms for clients. Equally they could not
respond by increasing their sales of charter flights, since
these flights are not a substitute for scheduled flights for
the majority of customers.

L 30/20

EN

Official Journal of the European Communities

4.2.2000

F. ABUSE OF A DOMINANT POSITION

being not
requirements(cid:146).

the maximum quantity but

the maximum

(96) Given that BA is dominant on the United Kingdom
market for air travel agency services the commission
schemes described above represent abuses of
that
dominant position. In particular they represent loyalty
condemned in the Michelin (33)
and
as
discounts
abusive
cases
Hoffmann-La
discrimination between travel agents.

Roche (34)

and

Exclusionary rebate schemes

schemes

firm. However

(97) Community competition law limits the type of discount
scheme that can be operated by a dominant
firm.
that are quite legitimate, and a
Discount
normal part or business activity when practised by a
non-dominant firm can be abusive when practised by a
dominant
from the
Hoffmann-La Roche case that a dominant firm cannot
enter into an agreement with a customer where the
agrees
customer
their
from that dominant
requirements
for
supplier (35). The
that a
dominant supplier cannot operate a discount scheme
which has an equivalent effect to an agreement that a
customer obtain all or part of its requirements from a
dominant supplier (36).

to obtain all or most of
a product
same

case also indicates

clear

is

it

(98)

that

given

discounts

Commission

In the Hoffmann-La Roche case, the Court agreed with
the
by
the
Hoffmann-La Roche were (cid:145)fidelity rebates(cid:146) and were
abusive of a dominant position as being equivalent to
an exclusivity requirement. The Court distinguished the
(cid:145)fidelity rebates(cid:146) granted by Hoffmann-La Roche from
legitimate quantity discounts as follows: (cid:145)This method of
calculating the rebates differs from the granting of
linked solely to the volume of
quantitative rebates,
purchases from the producers concerned in that
the
rebates at issue are not dependent on quantities fixed
objectively and applicable to all possible purchasers but
on estimates made, from case to case, for each customer
according
of
absorption, the objective which it is sought to attain

presumed

capacity

latter’s

the

to

(99) The Hoffmann-La Roche case established that a system
of discounts or rebates could have an equivalent effect
to an exclusivity requirement in a supply contract and
so be an abuse if practised by a dominant supplier. It
also confirmed the Commission’s decision that
the
system of discounts operated by Hoffmann-La Roche
was such a system. The subsequent Michelin (37) case
clarified when a discount scheme could be considered to
be exclusionary and so be abusive when operated by a
dominant supplier.

that

scheme was abusive,

(100) The Court stated that the scheme in Michelin was not
the same as the particular scheme in Hoffmann-La
Roche (38). The Court held that it had to decide whether
the Michelin discount
is
whether (cid:145)in providing an advantage not based on any
tends to
economic service justifying it,
remove or restrict the buyer’s freedom to choose (cid:133)(cid:146) (39).
The Court went on to find that the system of discounts
operated by Michelin, where rebates were given on a
customer’s purchases for a whole year in return for
meeting sales targets, set for each customer in view of
its
such a scheme. The Court
concluded that this was a system that rewarded loyalty
rather than being related to costs saved or extra benefits
secured by the supplier.

requirements, was

the discount

for

that

relate

to efficiencies,

(101) The Hoffmann-La Roche and Michelin cases establish a
general principle that a dominant supplier can give
discounts
example
discounts for large orders that allow the supplier to
produce large batches of product, but cannot give
discounts or incentives to encourage loyalty, that is for
avoiding purchases from a competitor of the dominant
supplier. They also establish that
the two discount
schemes that gave rise to the cases were of that type
and abusive. The commission schemes operated by BA
are in breach of this general principle and are very close
in form to that condemned by the Court in the Michelin
case. Although it is true, as BA argues, that cases must
be read in context and that Michelin should be
considered (cid:145)in the context of Roche(cid:146) this cannot mean
that a commission scheme that shows all
the same
features that the Court found determinative in Michelin
must also show the features of the scheme condemned
in Hoffmann-La Roche to be considered abusive. The

(33) Cited in footnote 13.
(34) Cited in footnote 14.
(35) Hoffmann-La Roche, at paragraph 89.
(36) Hoffmann-La Roche, at paragraph 90.

(37) Cited in footnote 13.
(38) Michelin, at paragraph 72.
(39) Michelin, at paragraph 73.

4.2.2000

EN

Official Journal of the European Communities

L 30/21

two cases taken together establish that a dominant
company can only give rebates in return for efficiencies
realised and not in return for loyalty, and establish that
the two particular discount schemes concerned are of
the type that rewards loyalty rather than efficiencies.

recitals 16, 17 and 18, a travel agent had to take part in
In addition, the general
the MA commission scheme.
conditions described in recital 19 were part of the MA.
Although the fund and the general conditions are not
abusive in themselves,
they were used as an extra
incentive to take part in the MA and reinforced their
effect.

(102) The commission schemes set out above are clearly
related to loyalty rather than efficiencies. Although BA
has provided evidence that it may realise efficiencies
when dealing with a travel agent
that sells a large
number of tickets those commissions are not related to
those efficiencies. As discussed in the section on
(cid:145)Discrimination(cid:146), below, a travel agent
that sells an
inefficiently small number of
tickets can earn the
maximum commission provided its small sales represent
a 25 % increase over its sales in the previous year.
Equally, a high volume travel agent will not get extra
commission in return for the economies of scale it
realises for BA unless its sales increase over the previous
year. BA has historically enjoyed a powerful position on
the United Kingdom market for air travel, which has led
to its dominant position in the market for air travel
agency services. As this powerful position on the United
Kingdom markets for air travel comes under threat from
new entrants and the removal of regulatory barriers to
competition, BA is using its commission scheme to
directly reward loyalty. Travel agents are encouraged to
remain loyal to BA rather than to sell their services to
competitors of BA by being given incentives to maintain
or increase their sales of BA tickets which do not
depend on the absolute size of
those sales. Such
commission schemes carried out by a firm enjoying a
dominant position as a purchaser of services from travel
agents are illegal, regardless of any possibility for the
travel agents or competing airlines to minimise or avoid
their effects.

(103) Airlines

alternatives

competing with BA have

to
purchasing air travel agency services from travel agents.
The main alternative is direct sales by telephone or
Internet, which amounts to (cid:145)in-house(cid:146) production of air
travel agency services. Travel agents remain by far the
most significant method used by airlines to sell air
transport in the United Kingdom, accounting for some
85 % of air travel sales. BA’s abusive conduct on the
market for air travel agency services has serious effects
on its competitor airlines on the United Kingdom
markets for air transport.

(104)

schemes

In the case of the MAs there is further evidence that
these
than
efficiencies.
from the (cid:145)training
to benefit
support and business development fund(cid:146) described in

related to loyalty rather

are
In order

such it does not

(105) As to BA’s arguments based on the letter it received
from a senior official of the Commission (40), that letter
was clearly stated to be a (cid:145)personal and provisional
reaction to your (Virgin’s) request for interim measures(cid:146)
and as
and cannot bind the
Commission. In any event the only finding in that letter
was that
there was not a prima facie case that BA’s
discounts for corporate customers infringed Article 82
of the Treaty. Those corporate discounts are not the
subject of this Decision. In addition, the absence of a
prima
that on full
examination of the facts an abuse does exist. Further
investigation was carried out by the Commission and
the result thereof was the analysis set out here.

case does not

exclude

facie

(106) The exclusionary effect of

the commission schemes
affects all of BA’s competitors and any potential new
entrants. They therefore harm competition in general
and so consumers, rather than only harming certain
competitors who cannot compete with BA on merit.

(107) Despite

the

commission

exclusionary

schemes,
competitors of BA have been able to gain market share
from BA since the liberalisation of the United Kingdom
air transport markets. This cannot indicate that these
schemes have had no effect. It can only be assumed that
competitors would have had more success
in the
absence of these abusive commission schemes.

Discrimination

(108) One of

the examples of an abuse of a dominant
position given in Article 82 of the Treaty is (cid:145)applying

(40) See footnote 15.

L 30/22

EN

Official Journal of the European Communities

4.2.2000

dissimilar conditions to equivalent
trading parties,
other
competitive disadvantage(cid:146) (41).

thereby placing them at

transactions with
a

transactions with different customers

(109) The obligation on a dominant firm not to discriminate
means that
it cannot apply dissimilar conditions to
so
equivalent
placing one customer at a competitive disadvantage (42).
The MA and PRS schemes described above will have
precisely this effect. Two travel agents handling the
same number of BA tickets and providing exactly the
same level of service to BA will receive a different
commission rate, that is a different price for their air
travel agency services if their sales of BA tickets were
in the previous year. Conversely two travel
different
selling different volumes of BA tickets and
agents
providing a different level of service to BA could earn
the same commission rate, that is be paid the same
price by BA for their air travel agency services, if their
sales of BA tickets have
same
percentage over the previous year.

increased by the

(110) BA points out that there may be cost savings for it if a
tickets and that
travel agent sells a large volume of
different
levels of
travel agents operate at different
efficiency and provide different levels of service to BA.
Although this might
justify the payment of different
commission rates to different travel agents, it does not
prevent the commission schemes which are the subject
of
this Decision from being discriminatory. The
respond to
commission schemes at
different volumes of sales by travel agents or different
levels of service provided by travel agents to BA. Under
these schemes extra commission is related to the extent
to which a travel agent meets or exceeds its previous
year’s sales of BA tickets.

issue do not

a

at

agents

certain travel

(111) The effect of these discriminatory commissions will be
to place
competitive
disadvantage relative to each other. Travel agents must
compete with each other to provide agency services to
the public and to persuade members of the public to
book air tickets through them. The resources available
to the travel agents
for example,
promoting their services to the public or by splitting
from their
travellers,
commission with
of
commission
level
these
commission income earned by travel agents
to
schemes will affect

to do this by,

the ability of

travel agents

income. By

distorting

come

the

compete with each other. In addition, as discussed more
fully in the section (cid:145)Exclusionary rebate schemes(cid:146), above,
these schemes will distort competition between BA and
other airlines on the markets for air transport services.

G. EFFECT ON TRADE BETWEEN MEMBER STATES

(112) The practices that are the subject of this Decision have
their primary effect on the market where BA and other
airlines purchase air travel agency services. The effect of
these practices is illegally to induce United Kingdom
travel agents to supply these services to BA rather than
to other airlines in competition with BA. These practices
tend to reduce the quantity of air travel agency services
provided to other airlines, and worsen the terms on
which these services are provided. Since many of these
airlines are based outside the United Kingdom these
practices clearly affect
intra-Community trade in air
travel agency services.

(113)

In addition, the air transport sales that result in the
commissions
this Decision
that are the subject of
include routes within the United Kingdom, between the
United Kingdom and the other Member States and
between the United Kingdom and third countries. The
effect of these abusive commission schemes will be felt
on the markets for this air transport. In particular these
practices have the object and effect of excluding
competitors to BA from the markets for air transport
originating in the United Kingdom. These air transport
are
services
States. These
sold between Member
practices
therefore have a further effect on trade
between Member States.

H. ARTICLE 3 OF REGULATION NO 17

(41) Article 82(c) of the Treaty.
(42) See for example Commission Decision 97/1315/EC, Irish Sugar
plc, (OJ L 258, 22.9.1997, p. 1), where the Commission followed
the Court’s judgment in Case 27/76 United Brands v. Commission
[1978] ECR 207.

(114) Pursuant to Article 3 of Regulation No 17, where the
Commission, upon application or upon its own
initiative finds that there is an infringement of Article
81 or Article 82 of
it may by decision
the Treaty,
require undertakings or associations of undertakings
concerned to bring such infringements to an end.

4.2.2000

EN

Official Journal of the European Communities

L 30/23

(115)

It is necessary for the Commission to require BA to
bring the infringements described in Section F to an
end, to the extent that it has not already done so, and
henceforth to refrain from any agreements or behaviour
which may have the same or similar object or effect.

(121) For these reasons the amount of the fine imposed to
reflect the gravity of the infringement is set at EUR 4
million, reflecting the serious nature, extent and impact
of the infringement.

D u r a t i o n o f t h e i n f r i n g e m e n t

I. ARTICLE 15 OF REGULATION NO 17

(116) Under Article 15 of Regulation No 17, infringements of
Article 82 of the Treaty may be sanctioned by fines of
up to EUR 1 million or 10 % of the turnover of the
undertaking in the preceding business year, whichever is
the greater. Regard must be had to both the gravity and
duration of the infringement.

(122) BA’s abusive behaviour has been carried out with
respect to selected large travel agents through MAs at
least since 1992 until the present. The PRS extended the
abusive behaviour to all UK travel agents and reinforced
the effect on agents party to an MA from 1 January
1998 to 31 March 1999. The abuses have persisted for
seven years. The amount of the fine imposed to take
account of
should
therefore be increased by 70 % to take account of its
long duration. This gives a fine amount of EUR 6,8
million.

the infringement

the gravity of

(117)

In fixing the fine in this case, the Commission will take
particular account of the following factors:

A g g r a v a t i n g a n d a t t e n u a t i n g
c i r c u m s t a n c e s

G r a v i t y o f t h e i n f r i n g e m e n t

(123) There are no aggravating or attenuating circumstances

relevant to this Decision.

(118) The behaviour at issue, an exclusionary rebate scheme
of the type which has been consistently condemned in
the past by the Commission and the Community
judicature, is a serious abuse of a dominant position and
was intended to eliminate or at least prevent the growth
for air
of competition to BA in the UK markets
transport. Such behaviour
is considered a serious
infringement of Community competition law.

(119) Air transport represents a major item of consumer
spending, and is an important cost for businesses in the
United Kingdom, particularly those businesses that trade
outside the United Kingdom, so this behaviour has
effects throughout the UK economy.

(120)

It seems reasonable to assume that it is partly as a result
of this behaviour that BA has been able to preserve an
average market share as high as 40 % in the UK markets
transport, despite the liberalisation that has
for air
removed the legal and regulatory environment which
allowed it to initially establish its leading position.
It
follows from this conclusion that the object and effect
of
the benefits of
these abuses has been to prevent
deregulation from being achieved in full.

HAS ADOPTED THIS DECISION:

Article 1

British Airways plc infringed Article 82 of
the Treaty by
operating systems of commission and other incentives with the
travel agents from whom it purchases air travel agency services
in the United Kingdom, which, by rewarding loyalty from the
travel agents and by discriminating between travel agents, have
the object and effect of excluding BA’s competitors from the
United Kingdom markets for air transport.

Article 2

For the infringements referred to in Article 1, a fine of EUR
6,8 million is hereby imposed on British Airways plc.

The fine shall be paid, within three months of the date of
notification of
account No
the European Commission, Banque
310-0933000-43 of

this Decision,

bank

into

L 30/24

EN

Official Journal of the European Communities

4.2.2000

Bruxelles Lambert, Agence EuropØenne, Rond Point Schuman
interest
5, B-1040 Brussels. After the expiry of that period,
shall be automatically payable at
the rate applied by the
European Central Bank to its repo operations on the first
working day of the month in which this Decision is adopted,
plus 3,5 percentage points, namely 6 %.

Article 4

This Decision is addressed to British Airways plc, Waterside,
PO Box 365, Harmondsworth, UB7 0GB, United Kingdom.

Article 3

This Decision shall be enforceable pursuant to Article 256 of
the Treaty.

British Airways plc shall
immediately bring to an end the
infringements referred to in Article 1 in so far as it has not
already done so.

Brussels, 14 July 1999.

British Airways plc shall refrain from repeating any act or
conduct described in Article 1, and from adopting any
measure having equivalent effect.

For the Commission

Karel VAN MIERT

Member of the Commission