2005/152/EC: Commission Decision of 14 December 1999 pursuant to Article 14 of Council Regulation (EEC) No 4064/89 imposing fines on an undertaking for supplying incorrect and misleading information in a notification in merger control proceedings (Case No COMP/M.1608 — KLM/Martinair III) (notified under document number C(1999) 4496) (Text with EEA relevance)
Date: 1999-12-14
Institutions: European Commission
Subjects: air transport, disclosure of information, economic concentration, fine, infringement of EU law, merger control, transport company

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Official Journal of the European Union

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COMMISSION

COMMISSION DECISION

of 14 December 1999

pursuant to Article 14 of Council Regulation (EEC) No 4064/89 imposing fines on an undertaking
for supplying incorrect and misleading information in a notification in merger control proceedings
(Case No COMP/M.1608 — KLM/Martinair III)

(notified under document number C(1999) 4496)

(Only the English text is authentic)

(Text with EEA relevance)

(2005/152/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(scheduled and charter) mainly from the Netherlands to
Mediterranean holiday destinations.

Having regard to the Treaty
Community,

establishing the European

Having regard to the Agreement on the European Economic
Area,

Having regard to Council Regulation (EEC) No 4064/89 of 21
December 1989 on the control of concentrations between
undertakings (1), and in particular Article 14(1)(b) thereof,

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

(2)

KLM also has a shareholding of 50 % in Martinair
Holland NV (Martinair), the remaining 50 % being held
by Koninklijke Nedlloyd NV (Nedlloyd). The Commission
considers that in this situation KLM and Nedlloyd can
exercise ‘decisive influence’ within the meaning of Article
3(3) of Regulation (EEC) No 4064/89 (the Merger Regu-
lation) over Martinair. Therefore they jointly control
the Merger Regulation.
Martinair for the purposes of
Martinair is the second-largest Dutch airline, also based
from
at Schiphol, operating mainly charter
Amsterdam to Mediterranean holiday destinations.
It
also has regular passenger services to a limited range of
long haul destinations, notably in North America.

flights

Having regard to the opinion of the Advisory Committee on
Concentrations,

(3)

Whereas:

I. INTRODUCTION

(1)

is the
Koninklijke Luchtvaart Maatschappij NV (KLM)
leading Dutch international airline, based at Amsterdam
Schiphol airport. KLM itself operates scheduled flights
carrying passengers and cargo, serving a wide range of
European and intercontinental destinations. KLM's airline
interests include Transavia Airlines BV, a majority-owned
flights
(80 %)

in passenger

specialising

subsidiary

(1) OJ L 395, 30.12.1989, p. 1. Regulation as last amended by Regu-

lation (EC) No 1310/97 (OJ L 180, 9.7.1997, p. 1).

control of

On 1 September 1998 KLM notified, pursuant to Article
4 of the Merger Regulation, a proposed concentration by
which it would acquire
the whole of
Martinair (2). The notification was withdrawn on 22
September 1998 (3) after
the Commission informed
KLM orally of its intention to declare the notification
incomplete. On 21 December 1998 KLM notified the
operation again (4). On 1 February 1999 the Commission
decided to initiate proceedings in application of Article
6(1)(c) of the Merger Regulation (5), and on 19 March
1999 the Commission issued a statement of objections
against the planned operation. On 31 May 1999 KLM
informed the Commission that it had abandoned the
operation.

(2) Case No IV/M.1128 — KLM/Martinair (OJ C 281, 10.9.1998, p. 7).
(3) OJ C 298, 26.9.1998, p. 8.
(4) Case No IV/M.1328 — KLM/Martinair (OJ C 408, 29.12.1998, p. 8).
(5) OJ C 42, 17.2.1999, p. 9.

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II. THE LANGUAGE OF PROCEEDINGS IN THIS CASE

(6)

(4)

(5)

On 25 June 1999 the Commission sent a statement of
objections to KLM setting out its preliminary view that
the notification of 1 September 1998 contained incorrect
or misleading information (save as otherwise specified,
references in this Decision to ‘the notification’ are to
the notification of 1 September 1998). The statement
of objections was drafted in English.
In its response
the English language and
KLM objects to the use of
requests that the proceedings be conducted in Dutch.
KLM refers to Article 3 of Council Regulation No 1
determining the languages to be used by the European
Economic
that
documents which an EU institution sends to a person
subject to the jurisdiction of a Member State must be
drafted in the language of that State. KLM argues that its
choice of English as a language related only to the noti-
fication (which was made in English) and that it did not
forfeit its right to receive the statement of objections of
25 June 1999 in its own language. KLM explains that it
opted to submit the notification in English in order to
accommodate the Commission, given the tight and strict
deadlines that apply in the merger control procedure. It
states that such deadlines do not apply to the present
proceedings.

Community (6),

provides

which

for

the

selected by

Article 2 of Regulation No 1 provides that documents
sent to institutions of the Community may be drafted in
any one of the official languages selected by the sender.
The reply of the institution must then be drafted in that
sender. Article 2(4) of
language
Commission Regulation (EC) No 447/98 of 1 March
1998 on the notifications,
time limits and hearings
provided for in Council Regulation (EEC) No 4064/89
on the control of concentrations between undertakings (7)
gives expression to this general rule. It provides that the
language chosen by the parties
the notification
becomes the ‘language of the proceeding’. KLM argues
that it selected English for the procedure following the
notification only and not for the present proceedings.
The Commission interprets this provision as referring
to all proceedings under the Merger Regulation which
relate to the notified operation and not
those
proceedings
leading to substantive decisions on the
concentration itself, such as a decision under Article 6
or Article 8. In relation to a notification under Article 4
of the Merger Regulation a number of proceedings are
possible, such as the proceedings leading to decisions
under Article 11(5) and Article 13(2), proceedings
(c) or (d) and Article 14(2)(a),
under Article 14(1)(b),
(b), or (c), proceedings leading to decisions to revoke a
decision under Article 6(3) or Article 8(5) or proceedings
on issues relating to access to files. All these proceedings
relate to the notification, for which the parties had the
choice of the language.

just

(6) OJ 17, 6.10.1958, p. 385/58. Regulation as last amended by the

2003 Act of Accession.

(7) OJ L 61, 2.3.1998, p. 1. Regulation as last amended by the 2003

Act of Accession.

In this case the notification was made in English and all
communications with the parties were conducted in
English. KLM's request would have as a result that the
representations made by KLM to the Commission in
English would have to be discussed in Dutch. The
procedure under Article 14(1)(b)
is inseparably linked
to the notification. For these reasons the Commission
considers that English is the correct language for the
present proceeding.

III. INFRINGEMENT OF THE MERGER REGULATION:

RELEVANT FACTS

According to the notification the activities of the KLM
group and Martinair overlap in three areas: charter flights
to the Mediterranean, scheduled flights to North America
and the transport of cargo. The incorrect or misleading
information concerns the activities of the KLM subsidiary
Transavia in passenger transport to Mediterranean desti-
nations: KLM submitted incorrect
information on the
charter destinations of Transavia and withheld relevant
information on scheduled flights of Transavia.

1. Information on Transavia charter destinations

(a) the information given in the notification

a

is

table

form of

The notification contains on page 40 of Form CO a table
with a listing of Transavia's and Martinair's charter desti-
nations to the Mediterranean for the summer season
1998. The
synopsis
in the
comparing the destinations for each country. The term
‘Mediterranean countries’ is defined earlier in the notifi-
cation (8) as comprising Cyprus, Egypt, France,
Israel,
Italy, Portugal, Greece, Turkey, Tunisia,
Malta, Spain,
and Morocco. There are 12 destinations
listed for
listed for Transavia.
and 46 destinations
Martinair
According to the table there is an overlap for only six
destinations (Ibiza, Corfu, Kos, Antalya, Dalaman and
Monastir).

(7)

(8)

(9)

The table is preceded on page 39 by the statement that
Transavia's and Martinair's operations are largely comple-
mentary:

‘Transavia's and Martinair's charter services are to a large
extend complementary. Martinair operates large aero-
planes (B747, MD-11, B767) on just a few Mediterranean
aeroplanes
destinations. Transavia operates
(B757) on various (other) destinations, most of which
— due to their size — can not be served by Martinair's
planes.’

smaller

(8) Page 26 of the notification.

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The table on page 40 of the notification is as follows:

‘Charter destinations

in the Mediterranean region of

Transavia and Martinair summer 1998

Country

Martinair

Transavia

Spain

Portugal

Greece

Turkey

Tunisia

Morocco

Egypt

Israel

Cyprus

Italy

France

Ibiza
Las Palmas
Tenerife
Malaga
Palma de Mallorca

Ibiza
Jerez de la Front
Almeria
Menorca
Gerona
Reus
Arrecife
Fuerteventura

Faro

Corfu
Kos
Heraklion

Antalya
Dalaman

Monastir

Oporto

Corfu
Kos
Prevenza
Kefalina
Zakynthos
Kalamata
Chania
Santorini
Mykonos
Athene
Volos
Skiathos
Thessaloniki
Kavala
Limnos
Mytilini
Skyros
Chios
Samos
Karpathos

Antalya
Dalaman
Bodrum
Istambul

Monastir

Agadir

Luxor
Hurghada

Tel Aviv

Paphos
Larnaca

Rome
Catania
Rimini
Milano
Verona

Ajaccio’

(b) incorrectness of the information on Transavia charter desti-

nations

(10)

In the investigation it became apparent that at least 10
so-called Mediterranean destinations, namely
further
Palma de
Alicante,

Palmas, Tenerife, Malaga,

Las

Mallorca, Faro, Funchal, Rhodes, Heraklion and Djerba
were served by Transavia charter flights in 1998 and
were not mentioned in the table. That information was
contained in a Transavia timetable submitted in response
to a request for information (9). With the exception of
Alicante, Funchal, Rhodes and Djerba, these are all desti-
nations which are also served by Martinair charter flights.
Therefore, all Martinair destinations are also served by
Transavia, which means
in reality there is a
complete overlap between Transavia and Martinair desti-
nations.

that

(11) Moreover, the missing destinations include several of the
most
important ones for holiday customers and for
Transavia and Martinair. For example, Spain is by a
significant margin the most popular country of desti-
nation, and the missing destinations in Spain and its
islands include some of
tourist
airports there.

important

the most

2. Information on scheduled services of Transavia to

Mediterranean destinations

(a) information given in the notification

(12) Nowhere in the notification did KLM state that Transavia
has substantial scheduled operations to Mediterranean
it sells seats on these
holiday destinations and that
flights to package tour operators.

(13)

the heading

the notification is entitled ‘Market defi-
Section 6 of
nitions’. Under
‘I. Affected Markets’
question 6.1 of Form CO is repeated. Then KLM states
the heading ‘A. European (inclusive)
charter
under
market’ (10) that there is no affected market due to the
small market share ([…] (*) %) (*) of
the parties (11).
Although KLM consequently claims that the market for

(9) The timetable ‘Charter flights summer 1998’ was provided as
Annex III to a response (9 September 1998) to a request for
information (4 September 1998). The timetable also mentions
to the same
destinations
in Malta and Croatia. Annex I
response contains a listing of
stretches of
Transavia non-scheduled flights to Mediterranian destinations
from the Netherlands (55 destinations) and the number of
stretches out of the rest of Europe to Mediterranian destinations
(22 destinations). This listing also contains these and additional
destinations but no destinations in Israel, Morocco and Tunisia.

the number of

(10) Page 26 of the notification.
(*) Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets and marked with an asterisk.

(11) In order to determine its market share in the market for charter
flights
to the Mediterranean, KLM has used a very wide
geographic market definition. KLM states that the planes of the
parties and of other charter companies can operate from each
airport in the Benelux, the United Kingdom and Germany. On
this basis a market share of […] (*) % is calculated (page 61). If
only flights from the Netherlands were taken into account, the
market share of the parties would be above […] (*) % (page 62 of
the notification).

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L 50/13

charter flights is not an affected market it nevertheless
states that it describes the market as if it were an affected
‘However, in order to provide the Commission
market:
with relevant information they will describe this market
as if it were an affected market.’ (12). The description is
then given on pages 26 to 41 of the notification without
any further headings.

(17)

that Transavia is
to the effect
The only statement
in the
is made
operating scheduled flights at all
the market
subsequent chapter on the description of
‘B. Western Europe (via
for flights to North America:
Amsterdam) — United States /Canada markets’.
In a
footnote in relation to a statement that Martinair does
not participate in the KLM frequent flyer scheme it is
stated:
in KLM's
frequent flyer program only when travelling on Trans-
avia's scheduled flights and when KLM does not operate
on such destinations itself.’ (16). This information was not
included as information on scheduled flights but as infor-
mation on participation in the KLM frequent
flyer
scheme (17).

‘Transavia

passengers

participate

(18) Under the heading ‘II. Markets related to affected markets
within the meaning of Section III.’ is printed the text of
Question 6.2 of Form CO: Describe the relevant product
and geographic markets concerned by the notified
operation, which are closely related to the affected
market(s)
(in upstream, downstream and horizontal
neighbouring markets), where any of the parties to the
concentration are active and which are not themselves
affected markets within the meaning of Section III.

(19)

In response to this KLM briefly explains that KLM and
Martinair each have a non-controlling participation in a
tour operator and that KLM has a share in a computer
reservation system. The notification continues:

‘In addition, Martinair has charter flight operations to
other destinations (e.g. Caribbean). KLM is only active
in the European charter market through its subsidiary
Transavia. KLM and Martinair have scheduled flights to
various other destinations.’ (18).

(20)

There is no statement in this chapter that Transavia is
operating scheduled flights to Mediterranean destinations.
The only statement in this chapter concerning Transavia
‘KLM is only active in the European charter market
is:
through its subsidiary Transavia.’ (19).

(b) misleading or

incorrect

character of

the

information

provided on the scheduled services of Transavia

(21)

investigation of

the case it became
In the further
scheduled
apparent
that Transavia had substantial
operations to Mediterranean destinations and that
it
sold seats on those flights to tour operators which inte-
grated those seats into package tours.

(16) Footnote 11 on page 45 of the notification.
(17) KLM's covering letter with the notification of 1 September 1998.
(18) Page 47 of the notification.
(19) Page 47 of the notification.

(14)

The product market is defined as follows:

‘KLM (primarily through Transavia) (13) and Martinair are
both active in the product market that can be defined as
the market for transport by plane at the request of tour
operators, for inclusion in an organised foreign holiday
package including accommodation to countries around
the Mediterranean.’ (14).

(15)

The notification refers to this market as the ‘charter
market’ which can be distinguished from markets
concerning scheduled air
transport. The differences
between charter flights and scheduled flights are set out
as follows:

‘This charter market is a market that can be distinguished
from markets concerning scheduled air transport to these
destinations. First of all, the airlines' customers in the
charter market are not the passengers like in scheduled
flights.
In this market tour operators are the airlines'
customers. Tour operators request the airlines to fly to
a certain holiday destination with a certain frequency and
capacity. They buy a (minimum) amount of seats on the
chartered planes, which is called an allotment. These
seats are sold as part of an inclusive tour to passengers
by tour operators and their agents for their own account.
This makes
from
scheduled flights.’ (15).

service substantially different

this

(16)

There is no statement
in this chapter that Transavia
operates scheduled flights to Mediterranean destinations
and sells seats on those flights to tour operators which
are guaranteed by the tour operator and integrated into
package tours. Neither the map with Transavia desti-
nations nor the timetable referred to in paragraph 10
were contained in the notified documents.

(12) Page 26 of the notification.
(13) Although this statement seems to imply that KLM is to a small
extent active on this market, no further information on KLM is
given, with the exception of
information in the
appendix of the SH&E study. In Section 3.2.1 of Form CO KLM
states:
is active on the European
(inclusive tour) charter market, which is in view of the parties to
the concentration, not an affected market. Solely for the Commis-
sion's information, Transavia is mentioned here.’

‘Transavia airlines B.V.

the statistical

(80 %)

(14) Page 26 of the notification.
(15) Page 26 of the notification.

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(22)

(23)

In response to a request for information (20), KLM stated
in a letter of 9 September 1998 that Transavia had
scheduled operations
to Malaga, Alicante, Barcelona,
Casablanca, Djerba, Faro, Funchal, Heraklion, Lisbon,
Las Palmas, Malta, Nice, Palma de Mallorca, Tenerife
(altogether […] (*) one-way passengers in 1997). This
situation has not changed substantially since then;
Transavia
scheduled
operations to Mediterranean destinations. Most of those
destinations are also served by Transavia charter flights.
In KLM's letter there is no statement that seats on those
scheduled flights are sold to tour operators.

continued to have

substantial

(25)

(26)

that KLM gave further

‘Indeed, guaranteed seats are

submitted in December
It was only in documents
1998 (21)
information on its
sales of seats on scheduled flights to tour operators,
stating:
sold to tour
operators.’ (22) and ‘Tour operator fares on scheduled
flights for guaranteed seats are equal to guaranteed seat
fares on non-scheduled flights.’ (23). This latter statement
has been confirmed by a letter from KLM of 4 March
1999 where it is shown that average gross prices of
guaranteed seats
sold to tour operators are almost
identical on scheduled and non scheduled flights. In the
‘Reality,
notification of December 1998 KLM stated:
however,
the border line
is seldom black and white,
between scheduled and charter services is situated in a
grey area. Guaranteed seats sold on scheduled flights to
tour operators on routes to popular holiday destinations
in the Mediterranean, come close to similar services on
charter flights.’ (24). From the information submitted it
can be calculated that out of […] (*) (25) passengers trans-
ported by Transavia (26) on scheduled flights to Mediter-
ranean destinations (27) in the season summer 1997 and
in winter 1997/1998 altogether […] (*) (28) seats were
sold to tour operators on a guaranteed basis and
[…] (*) seats were sold to tour operators on a non guar-
anteed basis (29). For certain destinations the majority of
seats for all passengers transported (30)
is sold to tour
operators.

IV. RESPONSE TO THE STATEMENT AND THE COMMIS-

SION's EVALUATION THEREOF

1. Information on Transavia Charter Destinations

(24)

statement of
In responding
objections, KLM describes the omission of
the desti-
nations referred to in paragraph 10 as an ‘administrative

to the Commission's

(20) Commission request of 4 September 1998.
(21) Notification of 21 December 1998.
(22) Notification of 21 December 1998, p. 64, footnote 18.
(23) Notification of 21 December 1998, p. 65, footnote 19.
(24) Notification of 21 December 1998, p. 66.
(25) […] (*) in summer 1997 and […] (*) in winter 1997/98.
(26) In addition, KLM also sells non-guaranteed seats on its flights to

tour operators.

(27) Malaga, Alicante, Barcelona, Djerba, Faro, Funchal, Heraklion,

Lisbon, Las Palmas, Malta, Nice, Mallorca, Tenerife.

(28) Page 69 of the notification of 21 December 1998 and Annexes
XXIX (summer 1997) and XXX (winter 1997/1998); […] (*)
in
summer 1997 and […] (*) in winter 1997/1998.

(29) Page 69 of the notification of 21 December 1998 and Annexes
XXIX (summer 1997) and XXX (winter 1997/1998); […] (*)
in
summer 1997 and […] (*) in winter 1997/1998.

(30) E.g. in the summer season 1997, Djerba, Faro, Funchal, Heraklion,

Lisbon, Las Palmas, Malta, Mallorca, Tenerife.

error’. KLM explains that in providing the information it
based itself on the in-flight magazine published by
Transavia. The in-flight magazine contains a map with
Transavia destinations. Scheduled destinations are marked
with a yellow dot and charter destinations are marked
with a red dot. The destinations which are reached both
by charter and by scheduled flights are however also
marked with a yellow dot. These are Alicante, Las
Palmas, Tenerife, Malaga, Palma de Mallorca, Faro,
Funchal, Rhodes, Heraklion and Djerba. KLM states that
the incorrect designation of those destinations in the in-
flight magazine is
the reason why they were not
mentioned as charter destinations.

it

it

clear

claims, makes

KLM also refers to a study by SH&E annexed to the
notification which,
that
Transavia is serving further charter destinations. KLM
states it should have been evident to anyone examining
the notification and the annexes that
the difference
between the table in the notification and the tables in
the annexes for the previous years was due to an error
and that any closer study of the notification had rightly
prompted questions on the part of the Commission.

acquisition of

the 50 % Nedlloyd stake

The notification contains in Annex X a listing of KLM's
and Martinair's destinations, but no listing of Transavia's
destinations. The map with Transavia destinations and
the Transavia timetable referred to in paragraph 10 was
not part of the notified documents. Annex VIII of the
notification contains the SH&E study of June 1998: ‘The
European Charter Market — An analysis in relation to
KLM's
in
Martinair’. The study has 60 pages of text. Appendix 2
to the study (Non-scheduled passengers from Belgium,
Germany, the Netherlands and the UK by Mediterranean
destination and carrier) sets out
tables for the years
1993, 1995 and 1997 which list all Mediterranean desti-
nations served by non-scheduled flights from Schiphol
and which give for each destination the total number
of passengers, the number of passengers transported by
competitors and the number of passengers transported
by KLM, Martinair and Transavia. From those tables it
can be concluded that Transavia was serving in the
period 1993-1997 airports other than those airports
which are mentioned for the year 1998 in the table on
page 40 of Form CO of the notification, including the 10
destinations referred to in paragraph 10.

(27)

The introduction to Form CO contains a section entitled
‘The need for correct and complete information’ which
states:

‘All information required by this form must be correct
information required must be
and complete. The
supplied in the
form.
Annexes to this form shall only be used to supplement
the information supplied by the form itself.’

appropriate

section of

this

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(28)

(29)

The information on charter destinations in the table on
page 40 of Form CO is clear and does not contain any
ambiguity. There is no obvious mistake which could be
easily detected. The table contains no reference to the
study cited by the parties or to any other source of
information. The only instance in this chapter where a
reference to the study is made is on page 34 in the
context of the definition of the geographic scope of the
relevant market and in order to support the argument
that the geographic market is Europe wide (31). In this
‘KLM and Martinair adopt SH&E's
context KLM states:
conclusion as their own for the purpose of this notifi-
cation.’ (32).

the

The SH&E study refers to the years 1993 to 1997 and
does not contain any information for the summer season
1998. Moreover,
information in the
statistical
appendix to the study is not presented in such a way
that a comparison with the table in the notification could
easily be made. In any event, airlines change the desti-
nations they serve from time to time. Consequently it
could not be clearly inferred from the presence of the
10 destinations referred to in paragraph 10 in the SH&E
study for the years up to 1997 that their absence from
the information provided in respect of 1998 was due to
an error by KLM and not to a change in the destinations
the information provided in the
served. Therefore,
appendix to the SH&E study cannot serve to rectify the
incorrect information given in the appropriate section of
Form CO of the notification.

2. Information on Transavia's Scheduled Flights

(30)

KLM argues that Transavia's sales of seats on scheduled
flights are not part of the relevant product market and
therefore did not need to be mentioned. In response to
the oral question whether Transavia scheduled flights are
included in the market share data provided in the noti-
fication KLM gave the following written reply:

and,

‘Such market shares are not
included in the SH&E
in KLM's notification.
consequently,
analysis
Martinair only operates as a non- scheduled carrier on
Mediterranean destinations, as a result of which there is
no overlap between the activities of Martinair and
Transavia within the non-scheduled Mediterranean
market. The European non-scheduled Mediterranean
market
scheduled
market for the reasons described below:

substantially different

from a

is

non-scheduled (charter) traffic is sold virtually only at
the route; passengers on non-scheduled
one end of
(charter)
flights buy their seats from a tour operator,
while passengers on scheduled flights buy predominantly
from travel agents or directly with the airline involved;

(31) Further references to the SH&E study are made in chapter 7 (Infor-

mation on affected markets) of the notification.

(32) Page 34 of the notification.

seats on non-scheduled (charter) flights are sold to tour
operators, contrary to seats on scheduled flights which
are only sold to tour operators in small allotments; non-
scheduled (charter) flights are operated at the commercial
risk of one or more tour operators, the commercial risk
of scheduled flights is with the air carrier; penalties for
cancellation on scheduled flights are non-existing or, at
least, much more liberal;
the non-scheduled (charter)
market has many more and different players.

The information provided in response to the Commis-
sion's request for information can not be added to the
KLM Group's market share provided on p. 62 of the
notification.
Including Transavia scheduled flights into
the market base would necessarily lead to a substantial
increase of the total market base, since scheduled flights
by other carriers should then be included as well. …’ (33).

(31)

(32)

(33)

the following definition of

The information required by Form CO in relation to
market definition is described in Section 6. In Section
6.I,
the relevant product
‘A relevant product market comprises
market is used:
all those products and/or services which are regarded
as interchangeable or substitutable by the consumer, by
reason of the product's characteristics, their prices and
their intended use. A relevant product market may in
some cases be composed of a number of
individual
products and/or services which present largely identical
physical or
inter-
changeable.’

characteristics

and are

technical

the fact

In view of
that certain seats on Transavia's
scheduled flights are sold to package tour operators at
the same price and under the same economic condition
(guaranteed) as seats on charter flights, these sales are
considered by the Commission to form part of
the
same product market. The fact that such a market defi-
nition would mean that seats sold on scheduled flights
performed by other airlines might also have to be
included into the relevant product market cannot serve
to allow KLM to omit this information.

The Commission notes that KLM believed that seats sold
to tour operators on scheduled Transavia flights did not
form part of the same market as seats sold on charter
flights. However, even under
that assumption those
activities should have been mentioned in response to
Question 6.2 of Form CO as activities in a ‘market
closely related to the affected market’ (so-called neigh-
bouring markets). The purpose of the question on neigh-
bouring markets is precisely to obtain the necessary
information in cases where the parties have used a
market definition which may be narrower than the one
retained by the Commission.

(33) Letter from KLM of 18 September 1998.

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(34)

(35)

(36)

form part of

KLM gave a detailed explanation of why in its view
scheduled flights did not
the relevant
product market and was therefore aware that its was a
market which was closely related.
In its response to
Question 6.2 on neighbouring markets KLM did not
leave the respective chapter blank. KLM referred to its
and Martinair's shareholding in tour operators and to
its participation in a computer reservation system.
It
further stated that Martinair had charter flight operations
to other destinations (Caribbean) and that KLM and
Martinair had scheduled flights to various other desti-
nations (34). That statement on charter and scheduled
flights shows that KLM understood the question on
neighbouring markets. However, KLM made
no
mention there of Transavia's scheduled flights. In that
context, the detailed description by KLM of other neigh-
bouring activities reinforces the impression that the infor-
mation is complete and makes the omission misleading.

2. Information on Transavia's Scheduled Flights

(38)

any

information indicating

The omission of
that
Transavia has scheduled flights to Mediterranean desti-
nations and that Transavia sells seats on those flights
to tour operators makes the information provided on
Transavia both misleading and incorrect within the
meaning of Article 14 (1)(b) of the Merger Regulation.

(39) Not

to refer

to Transavia's

scheduled Mediterranean
flights is, in the context of the rest of the information
provided in the Form CO, not a matter of a simple
omission but, as explained above (Sections III and IV),
substantively misleads the reader as it gives a distorted
picture of the true facts. Thus, the information is both
incorrect and misleading within the meaning of Article
14(1)(b) of the Merger Regulation.

V. LEGAL ASSESSMENT

(40)

1. Information on Transavia's Charter Destinations

extent

complementary’ (35).

The information given in the table on page 40 of Form
CO on Transavia charter destinations is incorrect in that
at least 10 destinations, most of them very important
ones, are not mentioned. The incorrectness of the infor-
mation is reinforced by the statement preceding the table
that ‘Transavia's and Martinair's charter services are to a
by
large
omitting important Spanish, Portuguese and Greek desti-
nations the table gives the incorrect impression that the
overlap in operations between Transavia and Martinair is
only limited. The reference on page 39 to services being
complementary can not be understood as relating only to
the size of the planes, given the context in which the
statement was made — immediately before the table.
Furthermore, the statement that Transavia operates to
destinations ‘other’ than those of Martinair supports the
false impression which the reader gains from the table.

In particular,

that

incorrect

information was grossly
The supply of
the parties' explanation concerning
negligent. Even if
the use of Transavia's in-flight magazine is accepted,
then a high degree of negligence is involved. An in-
flight magazine
promotional
brochure where accuracy is not necessarily guaranteed.
The parties should have used a more reliable source of
information, such as internal statistics of Transavia or the
Transavia
to the
Commission. As Transavia is a fully controlled subsidiary
that information was readily available to KLM.

timetable which was

a marketing

later

sent

or

is

The Commission cannot exclude the possibility that KLM
intentionally withheld the information on Transavia's
the very least a high degree of
scheduled flights. At
negligence
its
relevance, and the requirement to provide it in Form
CO, are or should have been well-known to KLM.

information,

involved,

since

the

is

(41) Accordingly, KLM's failure to include this information is
also an infringement in respect of which a fine can be
imposed.

VI. IMPOSITION OF FINES

(42) Under Article 14(1)(b) of

the Merger Regulation,

the
fines of
Commission may impose on undertakings
from EUR 1 000 to EUR 50 000 where,
intentionally
or negligently, they supply incorrect or misleading infor-
mation in a notification pursuant to Article 4 of the
Merger Regulation. Under Article 14(3),
in setting the
amount of the fine, the Commission is to take account
of
the infringement. The
Commission thereby takes account of any aggravating
or mitigating circumstances.

the nature and gravity of

1. Nature of the infringement

(43)

The infringement committed by KLM took the form of
incorrect and misleading information
the supply of
the Merger
within the meaning of Article 14(1)b of
Regulation. The supply of this incorrect and misleading
information was at the very least grossly negligent.

(37) Accordingly, KLM's failure to supply correct information
on this point constitutes an infringement for which a fine
may be imposed under Article 14(1)(b) of the Merger
Regulation.

(34) Page 47 of the notification.
(35) Page 39 of the notification.

2. Gravity of the infringement

(44)

The infringement of
the Merger Regulation by KLM
should be regarded as a serious infringement for the
reasons set out below.

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(45)

(46)

(47)

(48)

(49)

(a) relevance of the incorrect or misleading information

the operation. This

Information concerning any overlap between the parties
on individual destinations is clearly of relevance to the
competition assessment of
is
regardless of the question whether the relevant market
consists of individual routes or of all or certain Mediter-
ranean destinations. The Transavia destinations which
were not mentioned
Spanish,
are
Portuguese and Greek holiday destinations which attract
a high volume of passengers. The information that
Transavia operates to all relevant Martinair destinations
is also relevant for the assessment of the amount of
actual competition between Martinair and Transavia, in
particular if seen in the context of the parties' repeated
statements that Martinair's and Transavia's operations are
complementary (36).

important

the

The information that Transavia is operating towards
many major holiday destinations scheduled and charter
services in parallel is also clearly of importance in order
to assess Transavia's market position. Regardless of
whether or not seats sold on scheduled flights form
the information
part of
that Transavia has substantial scheduled operations to
its charter destinations is relevant to an assessment of
the market strength of Transavia on those routes.

the relevant product market,

(b) mitigating factors invoked by KLM

KLM emphasises that it had several meetings with the
Commission in order to prepare the notification, that it
discussed several drafts of
the notification in those
meetings and that it complied in good faith with the
suggestions and remarks made by the Commission.
It
also points out that the notification in this matter was
very complex because of the lack of readily available
data. KLM further states that it is not proven that it
provided ‘incorrect or misleading’
information, or that
at any rate,
in view of the particular circumstances of
the case, any such provision cannot be taken as grounds
for the imposition of a fine. The Commission cannot
share this view for the reasons set out below.

(i) T r a n s a v i a ' s c h a r t e r d e s t i n a t i o n s

In its comments on the statement of objections, KLM
explains the omission of
the Transavia charter desti-
the result of an administrative error (37).
nations as
KLM further argues that the mistake should have been
evident to anybody examining the notification.

KLM argues that the table in question was only included
in the text of Form CO at the request of the Commission
and that for the ongoing summer season 1998 detailed
market share data were not yet available. However, the
table on page 40 of the notification is not presented as
an addendum or an update to the information contained
in the SH&E study referred to in paragraph 26 of this
is an illustration following the KLM's
Decision.

It

(50)

(51)

(52)

(53)

statement that Transavia's and Martinair's activities are
‘to a large extent complementary’. KLM's claim that this
table could only have been read in conjunction with the
study is unfounded as there is not even a reference to the
study.

If

is also unfounded.

the incorrectness of

the table was
KLM's claim that
obvious
the
charter destinations in question was not detected by
KLM, which has a much better knowledge of its activities
than anybody else, it was certainly not such an obvious
mistake that it could have been detected by any careful
reader.

the omission of

KLM emphasises that it was not its intention to withhold
that
the
information from the Commission and that
seriousness of its administrative error is exaggerated by
the Commission. However, the explanation of how KLM
collected the information on Transavia's charter desti-
nations shows a large degree of carelessness. To base
the information on an in-flight magazine and not on a
more reliable source shows a grave neglect of the duty to
select carefully the necessary information, particularly in
that Transavia is a fully controlled
view of
subsidiary.

the fact

(ii) T r a n s a v i a ' s s c h e d u l e d o p e r a t i o n s

KLM argues that it never made a secret in its contacts
with the Commission of the fact that the KLM Group,
including its subsidiary Transavia, operates scheduled
flights in Europe in general and to the Mediterranean
in particular. It also states that it would have provided
more information on Transavia's scheduled flights if the
Commission had requested it during the pre-notification
talks. KLM refers to the SH&E study which it claims
makes it clear that 47 % of all Dutch holiday-makers
go on vacation on a scheduled flight. KLM states that
it would be inconceivable that a large proportion of
these passengers would not be attributed to the KLM
group.

flights

The discussions in the prenotification meetings were
principally concerned with clarifying the market defi-
nition. The Commission accepts that since KLM did not
explain that Transavia had substantial sales of seats on its
the
scheduled
Commission did not initially contemplate taking those
activities into account for market definition purposes.
This does not, however, remove the obligation of KLM
to include full information on those activities, at least in
response to Question 6.2 of Form CO (38). Furthermore,
the information given in the SH&E study relates to all

tour operators,

to package

(36) Page 32 and page 39 of the notification, page 5 of the letter of 9

September 1998.

(37) See paragraph 24 of this Decision.

(38) Such information was given in the notification of 21 December

1998.

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from a tour operator.

Dutch holiday-makers and not just to customers who
buy a package tour
It was
therefore not possible to deduce from that information
that Transavia sold seats on its scheduled flights to
package tour operators. The way in which the infor-
mation on Transavia was presented in all drafts
submitted was not likely to prompt such questions on
the part of
the Commission. Transavia was always
presented as a ‘charter operator’. The information that
Transavia also operates scheduled flights was only given
in the final version of the notification in footnote 11 on
page 45, which concerns the participation of Transavia in
the KLM frequent flyer scheme. That information was not
contained in earlier drafts. The argument
the
Commission could, or should, have asked for that infor-
mation is therefore unfounded.

that

(54)

(55)

element

its market

to measure

KLM further claims that the information on scheduled
flights did not change KLM's market share and that
therefore the omission of that information was irrelevant.
However, the actual market share of a company is only
strength. The
one
operation by Transavia of scheduled services to desti-
nations which it also serves on a charter basis is clearly
a factor which can contribute to its strength on those
routes and is therefore relevant
to the Commission's
competition in connection with the
assessment of
merger. Accordingly,
substantive
assessment of the case, and the nature and scope of
any remedies that may be required,
is likely to be
affected by its knowledge (or lack of knowledge) of the
existence of those operations and of their nature and
extent.

the Commission's

For example, if it were really the case that Transavia had
no scheduled operations to those destinations, it might
be argued that
it would be relatively easy for other
scheduled airlines to commence such operations, selling
seats to individuals and to tour operators, and that in
consequence the merger should be allowed. Similarly, if a
possible dominant position were found to exist on some
of the routes concerned, a remedy which focused exclu-
sively on Martinair's operations, or Transavia's charter
operations, might be insufficient, since it would not
affect or take into account the substantial sales to tour
operators which Transavia makes on its scheduled flights
on those routes.

3. Amount of the fine

(56)

In proceedings initiated under the Merger Regulation, it is
very important that the parties to the merger supply full
information in submitting
the notification. These
constraints mean that firms must be particularly careful
in submitting details of their merger.

(57)

In the present case KLM supplied information which was
incorrect and misleading and KLM was at the very least,

(58)

(59)

(60)

(61)

the information was
grossly negligent. Furthermore,
clearly relevant for the competitive assessment of the
operation.

information on the

KLM provided the correct information not on its own
initiative but only as a result of the Commission's inves-
tigation. Complete
additional
Transavia charter destinations could only be derived
from information provided in a response to a request
for information and was finally confirmed orally. The
information that Transavia operates scheduled flights to
Mediterranean destinations was given as a result of a
request for information. The fact that KLM sells seats
on its scheduled flights to tour operators under the
same economic conditions as for its charter flights, and
the importance of that activity, was only fully confirmed
in the notification of 21 December 1998 and the
Commission's
the infor-
mation contained in that notification.

investigation of

subsequent

In assessing the conduct of KLM, it must also be borne in
mind that KLM is a large European company with
significant business
in Europe. KLM also had prior
experience of a notification under the Merger Regulation.

In mitigation, KLM has claimed, in summary and as more
fully described in paragraphs 47 to 55, that the alleged
infringements were not deliberate, that the Commission
should have been able to identify the missing infor-
mation and request it during the prenotification period
(which in this instance was quite extensive) and that the
missing information was not decisive for the outcome of
the case.

In the Commission's view, only limited weight can be
attached to those claims as regards their impact on the
gravity of the infringement and hence on the amount of
the fine that should be imposed. There is no evidence
that the infringements were intentional, and KLM's parti-
cipation in prenotification contacts with the Commission
indicates, at the least, a desire to ensure that its notifi-
cation was acceptable. Nevertheless, the responsibility for
ensuring that all relevant information was provided was
KLM's, and it failed to exercise due care in carrying that
task out. The degree of negligence associated with the
infringements is very substantial, in both instances. KLM
should not have relied on an in-flight magazine for
information such as that concerning Transavia's
crucial
charter destinations.
It could have provided the infor-
mation about Transavia's scheduled flights, and should
have appreciated the importance of doing so, even in
the absence of a specific request or reminder from the
Commission. Moreover it is certainly possible that if the
Commission had failed to identify either element of the
missing information,
its continued absence would have
affected the substantive decision on the merger, and in
ways which could have benefited KLM.

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(62) On the basis of the above, and taking account of the
circumstances in the case, the Commission considers it
appropriate to impose a fine of EUR 40 000 on KLM,
pursuant to Article 14(1)(b) of the Merger Regulation.

After the expiry of that period, interest 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, that is 3 %, plus 3,5 percentage points,
making 6,5 %.

HAS ADOPTED THIS DECISION:

Article 1

A fine of EUR 40 000 is hereby imposed on Koninklijke
Luchtvaart Maatschappij NV (KLM) pursuant
to Article
14(1)(b) of Regulation (EEC) No 4064/89 for having supplied
incorrect
and misleading information in the notification
submitted to the Commission under that Regulation on 1
September 1998.

Article 3

This Decision is addressed to:

Koninklijke Luchtvaart Maatschappij NV
Amsterdamseweg 55
NL-1182 GP Amstelveen

Article 2

Done at Brussels, 14 December 1999.

The fine referred to in Article 1 shall be paid within three
months of the date of notification of this Decision into bank
account No 310-0933000-43 of the European Commission,
Banque Bruxelles Lambert, Agence Européenne, Rond Point
Schuman 5, B-1040 Brussels.

For the Commission

Mario MONTI
Member of the Commission