Regulation (EC) No 868/2004 of the European Parliament and of the Council of 21 April 2004 concerning protection against subsidisation and unfair pricing practices causing injury to Community air carriers in the supply of air services from countries not members of the European Community
Date: 2004-04-21
Institutions: Council of the European Union, European Parliament
Subjects: air freight rate, airline, anti-dumping measure, anti-subsidy proceeding, third country

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(Acts whose publication is obligatory)

REGULATION (EC) No 868/2004 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 21 April 2004

concerning protection against subsidisation and unfair pricing practices causing injury to
Community air carriers in the supply of air services from countries not members of the European
Community

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO-
PEAN UNION,

(5)

Having regard to the Treaty establishing the European Com-
munity, and in particular Article 80(2) thereof,

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

Having regard to the opinion of the European Economic and
Social Committee (2),

Acting in accordance with the procedure laid down in Article
251 of the Treaty (3),

Whereas:

(1)

(2)

The competitive position of Community air carriers
when providing air services to, via or from the Com-
munity could be adversely affected by unfair and discri-
minatory practices of non-Community air
carriers
providing like air services.

Such unfair and discriminatory practices may result
from subsidisation or other forms of aid granted by a
government or regional body or other public organisa-
tion of a country not being a member of the Community
or from certain pricing practices by a non-Community
air carrier which benefit from non-commercial advan-
tages.

(3)

It is necessary to define the redressive measures to be
taken against such unfair practices.

(4) Within the Community there are strict rules regarding
the granting of State aid to air carriers, and for Com-
munity air carriers not to be placed at a competitive
disadvantage and suffer injury there is a need for an
instrument to offer protection against non-Community
air carriers who are subsidised or receive other benefits
from governments.

(1) OJ C 151 E, 25.6.2002, p. 285.
(2) OJ C 61, 14.3.2003, p. 29.
(3) Opinion of the European Parliament of 14 January 2003 (OJ C 38
E, 12.2.2004, p. 75), Council Common Position of 18 December
2003 (OJ C 66 E, 16.3.2004, p. 14). Position of the European
Parliament of 11 March 2004 (not yet published in the Official
Journal) and Council Decision of 30 March 2004.

(6)

(7)

(8)

(9)

(10)

This Regulation is not intended to replace air services
agreements with third countries that can be used to deal
effectively with practices covered by this Regulation;
where a legal
instrument exists at Member State level
which would enable a satisfactory response to be made
within a reasonable period of
instrument
would take precedence over this Regulation for that
period.

time,

that

The Community should be able to take action to redress
such unfair practices resulting from subsidies granted by
the government of a country which is not a member of
the Community; the Community should also be able to
address unfair pricing practices.

It should be determined when a subsidy shall be deemed
to exist and according to which principles it should be
in particular whether the subsidy has
countervailable,
been targeted at certain enterprises or sectors or is
contingent upon air service supply to third countries.

In determining the existence of a subsidy, it is necessary
to demonstrate that there has been a financial contribu-
tion by a government or regional body or other public
organisation via a transfer of funds or that debts of any
kind representing government revenue that are other-
wise due are foregone or not collected, and that a
benefit has thereby been conferred on the recipient
enterprise.

It should be determined when an unfair pricing practice
shall be deemed to exist; an examination of the pricing
practices of a third-country air carrier
should be
restricted to those limited number of cases where the air
carrier is benefiting from a non-commercial advantage
which cannot be clearly identified as a subsidy.

clearly distinguishable

It should be made clear that an unfair pricing practice
can be deemed to exist only in cases where that practice
is
competitive
pricing practices;
the Commission should develop a
detailed methodology for determining the existence of
unfair pricing practices.

from normal

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(11)

It is furthermore desirable to lay down clear and detailed
guidance as to the factors which may be relevant for the
determination of whether
the subsidised or unfairly
priced air services provided by non-Community air
carriers have caused injury or are threatening to cause
injury; in order to demonstrate that the pricing practices
related to the supply of such air services cause injury to
the Community industry, attention should be given to
the effect of other factors, and consideration should be
given to all relevant and known factors and economic
indicators which have a bearing on the state of the
industry, and in particular prevailing market conditions
in the Community.

(12)

It is essential to define the terms ‘Community air carrier’,
‘Community industry’, and ‘like air service’.

(13)

(14)

(15)

It is necessary to specify who may lodge a complaint
and the information that such a complaint should
contain; a complaint should be rejected where there is
insufficient evidence of injury to proceed.

It is desirable to lay down the procedure to be followed
in the investigation of unfair practices by non-Com-
this procedure should be limited in
munity carriers;
time.

It is necessary to lay down the manner in which inter-
ested parties should be given notice of the information
which the authorities require;
interested parties should
have ample opportunity to present all relevant evidence
and to defend their interests; it is also necessary to set
out the rules and procedures to be followed during the
investigation, in particular the rules whereby interested
parties are to make themselves known, present their
views and submit
information within specified time
limits, if such views and information are to be taken into
account; whilst respecting commercial confidentiality, it
is necessary to allow interested parties access to all infor-
mation pertaining to the investigation which is relevant
to the presentation of
is necessary to
provide that, where parties do not cooperate satisfacto-
rily, other information may be used to establish findings
and that such information may be less favourable to the
parties than if they had cooperated.

their case;

it

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

(16)

It is necessary to lay down the conditions under which
provisional measures may be imposed; such measures
may in all cases be imposed by the Commission only for
a six-month period.

(26)

(17) An investigation or proceeding should be terminated
whenever there is no need to impose measures,
for
example if the amount of subsidisation, the degree of
unfair pricing or the injury is negligible; a proceeding
should not be terminated unless the termination decision
is accompanied by a statement of the reasons therefor;
those measures should be less than the amount of coun-
if
tervailable subsidies or the degree of unfair pricing,
such lesser amount would remove the injury.

It is necessary to provide that the level of measures
should not exceed the value of subsidies or the non-
commercial advantages granted as the case may be or
the sum corresponding to the injury caused, where this
is lower.

It is necessary to provide that measures should remain in
force only for as long as it is necessary to counteract the
subsidies or unfair pricing practices causing injury.

Preference should be given to duties when it comes to
the imposition of measures; where duties prove not to
be appropriate, other measures may be considered.

It is necessary to specify procedures for the acceptance
of undertakings eliminating or offsetting the countervail-
able subsidies or unfair pricing practices and the injury
caused in lieu of the imposition of provisional or defini-
tive measures;
it is also appropriate to lay down the
consequences of breach or withdrawal of undertakings.

It is necessary to provide for review of the measures
imposed in cases where sufficient evidence is submitted
of changed circumstances.

The measures necessary for the implementation of this
Regulation should be adopted in accordance with
Council Decision 1999/468/EC of 28 June 1999 laying
down the procedures for the exercise of implementing
powers conferred on the Commission (1).

The form and level of measures and their enforcement
should be set out in detail
in a Regulation imposing
these measures.

It is necessary to ensure that any measures taken by
virtue of this Regulation are in full accordance with the
Community interest; the assessment of the Community
interest
involves the identification of any compelling
reasons which would lead to the clear conclusion that
the taking of measures would not be in the overall
the Community. Such compelling reasons
interest of
could, for example, include cases where the disadvantage
to consumers or other interested parties would be clearly
disproportionate to any advantages given to the Com-
munity industry by the imposition of measures.

Since the objective of
this Regulation, namely the
protection against subsidisation and unfair pricing prac-
tices causing injury to the Community air carriers in the
supply of air services from countries not members of the
European Community may well not be sufficiently
achieved by the Member States and can therefore be
better achieved at Community level,
the Community
may adopt measures, in accordance with the principle of
In
subsidiarity as set out in Article 5 of the Treaty.
accordance with the principle of proportionality, as set
out in that Article, this Regulation does not go beyond
what is necessary in order to achieve that objective,

(1) OJ L 184, 17.7.1999, p. 23.

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HAVE ADOPTED THIS REGULATION:

Article 1

Objective

1.
This Regulation lays down the procedure to be followed
to provide protection against subsidisation and unfair pricing
practices in the supply of air services from countries not
members of the European Community in so far as injury is
thereby caused to the Community industry.

This Regulation shall not preclude the prior application
2.
of any special provisions in air services agreements between
Member States and countries not members of the European
Community.

This Regulation shall not preclude the application of any
3.
special provisions in agreements between the Community and
countries not members of the European Community.

Article 2

Principles

A redressive measure may be imposed for the purpose of
offsetting:

1. a subsidy granted, directly or indirectly,

to a non-Com-

munity air carrier; or

2. unfair pricing practices by non-Community air carriers;

concerning the supply of air services on one or more routes to
and from the Community which cause injury to the Com-
munity industry.

Article 3

Definitions

For the purposes of this Regulation:

(a) ‘injury’

shall mean material

industry, or threat of material
industry, determined in accordance with Article 6;

injury to the Community
injury to the Community

(b) ‘Community industry’

shall mean the Community air
carriers supplying like air services as a whole or those of
them whose collective share constitutes a major proportion
of the total Community supply of those services;

(c) ‘Community air carrier’ shall mean an air carrier with a
valid operating licence granted by a Member State in
accordance with Council Regulation (EEC) No 2407/92 of
23 July 1992 on licensing of air carriers (1);

(d) ‘like air service’ shall mean air services which are supplied
on the same route or routes as the air services under
consideration or such air services that are supplied on a
route or routes closely resembling the route or routes on
which the air service under consideration is supplied.

Article 4

Subsidisation

1.

A subsidy shall be deemed to exist if:

(a) there is a financial contribution by a government or
regional body or other public organisation of a country not
a member of the European Community, that is to say,
where:

(i) a practice of a government or regional body or other
public organisation involves a direct transfer of funds
such as grants,
loans or equity infusion, potential
direct transfer of funds to the company or the assump-
tion of liabilities of the company such as loan guaran-
tees;

(ii) revenue of a government or regional body or other
public organisation that is otherwise due is foregone or
not collected;

(iii) a government or regional body or other public organi-
sation provides goods or services other than general
infrastructure, or purchases goods or services;

(iv) a government or regional body or other public organi-
sation makes payments to a funding mechanism or
entrusts or directs a private body to carry out one or
more of the type of functions illustrated under (i), (ii)
and (iii) which would normally be vested in the
in no real sense differs
government and, in practice,
from practices normally followed by governments;

(b) and a benefit is thereby conferred.

2.
Subsidies shall be subject to redressive measures only if
the subsidies are limited, in law or in fact, to an enterprise or
industry or group of enterprises or industries within the juris-
diction of the granting authority.

Article 5

Unfair pricing practices

1.
Unfair pricing practices shall be deemed to exist on a par-
ticular air service to or from the Community where non-Com-
munity air carriers:

— benefit from a non-commercial advantage, and

— charge air fares which are sufficiently below those offered

by competing Community air carriers to cause injury.

(1) OJ L 240, 24.8.1992, p. 1.

These practices must be clearly distinguishable from normal
competitive pricing practices.

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2. When comparing airfares, account shall be taken of the
following elements:

(a) the actual price at which tickets are offered for sale;

A determination of threat of injury shall be based on facts
4.
and not merely on allegation, conjecture or remote possibility.
The change in circumstance, which would create a situation in
which the subsidy would cause injury, must be clearly foresee-
able and imminent.

(b) the number of seats proposed at an allegedly unfair price
out of the total number of seats available on the aircraft;

(c) the restrictions and conditions attached to the tickets sold

at an allegedly unfair price;

(d) the level of service proposed by all carriers providing the

like air service in question;

(e) the actual costs of the non-Community carrier providing

the services, plus a reasonable margin of profit; and

(f) the situation, in terms of points (a) to (e), on comparable

routes.

3.
Acting in accordance with the procedure referred to in
Article 15(3), the Commission shall develop a detailed metho-
dology for determining the existence of unfair pricing practices.
This methodology shall cover, inter alia, the manner in which
normal competitive pricing, actual costs and reasonable profit
margins shall be assessed in the specific context of the aviation
sector.

Article 6

Determination of injury

The determination of injury shall be based on positive

1.
evidence and shall involve an objective examination of both:

(a) the level of fares of the air services under consideration and
the effect of such air services on fares offered by Com-
munity air carriers; and

(b) the impact of

those air

services on the Community
industry, as indicated by trends in a number of economic
indicators such as number of flights, utilisation of capacity,
passenger bookings, market share, profits, return on capital,
investment, employment.

No one or more of these factors can necessarily give decisive
guidance.

It shall be demonstrated, from all the positive evidence
2.
presented in relation to paragraph 1, that the air services under
consideration are causing injury within the meaning of this
Regulation.

3.
Known factors other than the air services under consid-
eration, which are injuring the Community industry at the
same time shall also be examined to ensure that the injury
caused by these other factors is not attributable to the air
services under consideration.

Article 7

Initiation of proceedings

1.
An investigation under this Regulation shall be initiated
upon the lodging of a written complaint on behalf of the Com-
munity industry by any natural or legal person or any associa-
tion, or on the Commission's own initiative, if there is sufficient
evidence
subsidies
(including, if possible, of their amount) or unfair pricing prac-
tices within the meaning of this Regulation, injury and a causal
link between the allegedly subsidised or unfairly priced air
services and the alleged injury.

countervailable

existence

the

of

of

2. When it is apparent that there is sufficient evidence to
initiate a proceeding, the Commission shall, acting in accord-
ance with the procedure referred to in Article 15(2), initiate the
proceeding within 45 days of the lodging of the complaint and
shall publish a notice in the Official
the European
Union. Where the issue in question is being discussed within
the framework of a bilateral agreement by the Member State
concerned, this 45-day deadline shall, at the request of the
Member State, be extended for up to 30 days. Any additional
extension to the deadline shall be decided upon by the
Commission acting in accordance with the procedure referred
to in Article 15(2).

Journal of

Where insufficient evidence has been presented, the Commis-
sion shall, acting in accordance with the procedure referred to
in Article 15(2), inform the complainant within 45 days of the
date on which the complaint was lodged.

The notice of initiation of the proceedings shall announce
3.
indicate the scope of the
the initiation of an investigation,
investigation,
the air services on the routes concerned, the
countries whose governments allegedly granted the subsidies or
license the air carriers allegedly engaged in unfair pricing prac-
tices and the period within which interested parties may make
themselves known, present their views in writing and submit
information, if such views are to be taken into account during
the investigation; the notice shall also state the period within
which interested parties may apply to be heard by the Commis-
sion.

4.
The Commission shall inform the air carriers supplying
the air services under consideration, the government concerned
and the complainants of the initiation of the proceedings.

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The Commission may, at any time invite the third-
5.
country government concerned to take part in consultations
with the aim of clarifying the situation as to the matters
referred to in paragraph 2 and arriving at a mutually agreed
solution. Where appropriate the Commission shall associate
with these consultations any Member State concerned. In cases
where consultations are already underway between a Member
State and the third country government concerned,
the
Commission shall liaise with the said Member State in advance.

Article 8

The investigation

1.
Following the initiation of the proceedings, the Commis-
sion shall commence an investigation which shall cover both
subsidisation or unfair pricing practices of air services supplied
by non-Community carriers on certain routes, and injury. This
investigation shall be carried out expeditiously and shall
normally be concluded within nine months of the initiation of
the proceedings, except in the following circumstances, where
it may be prolonged:

— negotiations with the third country government concerned
have progressed to a point that a satisfactory resolution of
the complaint appears imminent, or

— additional time is needed in order to achieve a resolution

which is in the Community interest.

The interested parties which have made themselves
2.
known in accordance with the time limits set forth in the
notice of initiation, shall be heard if they have made a request
for a hearing showing that they are an interested party likely to
be affected by the result of the proceeding and that there are
particular reasons why they should be heard.

3.
In cases in which an interested party refuses access to, or
otherwise does not provide, necessary information within the
appropriate time limits, or significantly impedes the investiga-
tion, provisional or final findings, affirmative or negative, may
be made on the basis of facts available. Where it is found that
the interested party has supplied false or misleading informa-
tion, the information shall be disregarded and use may be
made of the facts available.

Article 9

Redressive measures

Redressive measures, whether provisional or definitive, shall
preferably take the form of duties imposed upon the non-Com-
munity carrier concerned.

Article 10

Provisional measures

Provisional measures may be imposed if a provisional
1.
affirmative determination has been made that the non-Com-
munity carriers concerned benefit
from subsidies or are
engaged in unfair pricing practices causing injury to the Com-
munity industry and that the Community interest calls for
intervention to prevent further such injury.

2.
Provisional measures may be taken in accordance with
the procedure referred to in Article 15(2). Those measures shall
be imposed for a maximum of six months.

Article 11

Termination without measures

1. Where the complaint is withdrawn, or where a satisfac-
tory remedy has been obtained under a Member State's air
service agreement with the third country concerned,
the
proceeding may be terminated by the Commission unless such
termination would not be in the Community interest.

redressive measures

2. Where
the
proceeding shall be terminated in accordance with the proce-
dure referred to in Article 15(2). Any decision to terminate a
proceeding shall be accompanied by a statement of the reasons
therefor.

unnecessary,

are

Article 12

Definitive measures

1. Where the facts as finally established show the existence
of subsidies or unfair pricing practices and the injury caused
thereby, and the Community interest calls for intervention in
accordance with Article 16, a definitive measure shall be
imposed in accordance with the procedure referred to in
Article 15(3).

2.
The level of measures imposed to offset subsidies shall
not exceed the amount of subsidies, calculated in terms of
benefit conferred on the recipient enterprise, from which the
non-Community carriers have been found to benefit, and
should be less than the total amount of subsidies, if such lesser
level were to be adequate to remove the injury to the Com-
munity industry.

3.
The level of measures imposed to offset unfair pricing
practices benefiting from a non-commercial advantage, shall
not exceed the difference between the fares charged by the
non-Community air carrier concerned and the air fares offered
by the competing Community air carrier concerned, but should
be less if such lesser level were to be adequate to remove the
injury to the Community industry. In any event, the level of
measures should not exceed the value of the non-commercial
advantage granted to the non-Community air carrier.

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A measure shall be imposed in the appropriate amounts
4.
in each case, on a non-discriminatory basis, on air services
supplied by all non-Community air carriers found to benefit
from subsidies or engaged in unfair pricing practices on the
respective routes, except for air services supplied by those non-
Community air carriers for which undertakings under the
terms of this Regulation have been accepted.

5.
A measure shall remain in force only as long as, and to
the extent that, it is necessary to offset the subsidies or unfair
pricing practices which are causing injury.

Reviews under paragraph 1 shall be initiated by the
2.
Commission acting in accordance with the procedure referred
to in Article 15(2). The relevant provisions of Articles 7 and 8
shall apply to the reviews under paragraph 1. Reviews shall
assess the continued existence of subsidies or unfair pricing,
and/or injury caused thereby, together with a new determin-
ation as to whether the Community interest calls for continued
intervention. Where warranted by reviews, the measures shall
be repealed, amended or maintained, as appropriate in accord-
ance with the procedure referred to in Article 15(3).

Article 13

Undertakings

1.
Investigations may be terminated without the imposition
of provisional or definitive measures upon receipt of satisfac-
tory voluntary undertakings under which:

(a) the government granting the subsidy or non-commercial
advantage agrees to eliminate or limit the subsidy or non-
commercial advantage or take other measures concerning
its effects; or

(b) any non-Community air carrier undertakes to revise its
prices or to cease the supply of air services to the route in
question so that the injurious effect of the subsidy or non-
commercial advantage is eliminated.

Undertakings shall be accepted in accordance with the

2.
procedure referred to in Article 15(2).

3.
In case of breach or withdrawal of undertakings by any
party, a definitive measure shall be imposed in accordance with
Article 12, on the basis of the facts established within the
the investigation which led to the undertaking,
context of
provided that
the investigation was concluded with a final
determination as to subsidisation and that the non-Community
air carrier concerned, or the government granting the subsidy,
has been given an opportunity to comment, except in the case
of withdrawal of the undertaking by the non-Community air
carrier or such government.

Article 14

Reviews

so warrant,

the need for

1. Where circumstances
the
continued imposition of measures in their initial form may be
reviewed, on the initiative of the Commission or upon the
request of a Member State or, upon a request by non-Com-
munity air carriers subject to measures or by Community air
carriers provided that at least two consecutive IATA scheduling
seasons have elapsed since the imposition of the definitive
measure.

Article 15

Committee procedure

1.
The Commission shall be assisted by the Committee insti-
tuted by Article 11 of Council Regulation (EEC) No 2408/92 of
23 July 1992 on access for Community air carriers to intra-
Community air
the
Committee).

referred to as

(hereinafter

routes (1),

2. Where reference is made to this paragraph, Articles 3 and
7 of Decision 1999/468/EC shall apply, having regard to the
provisions of Article 8 thereof.

3. Where reference is made to this paragraph, Articles 5 and
7 of Decision 1999/468/EC shall apply, having regard to the
provisions of Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC
shall be set at three months.

4.

The Committee shall adopt its Rules of Procedure.

Article 16

Community interest

the Community interest calls for

A determination under Articles 10(1), 11(2) and 12(1) as to
whether
intervention or
whether measures should be maintained in accordance with
Article 14(2) shall be based on an appraisal of all the various
interests taken as a whole. Measures may not be applied where
it can be clearly concluded that this is not in the Community
interest.

Article 17

General provisions

1.
Provisional or definitive redressive measures shall be
imposed by Regulation, and enforced by Member States in the
form, at the level specified and according to the other criteria
laid down in the Regulation imposing such measures.
If
measures other than duties are imposed, the Regulation shall
define the precise form of the measures in accordance with the
provisions of this Regulation.

(1) OJ L 240, 24.8.1992, p. 8. Regulation as last amended by European
Parliament and Council Regulation (EC) No 1882/2003 (OJ No L
284, 31.10.2003, p. 1).

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Regulations imposing provisional or definitive redressive measures, and Regulations or Decisions
2.
accepting undertakings or suspending or terminating investigations or proceedings, shall be published in
the Official Journal of the European Union.

Article 18

Entry into force

This Regulation shall enter into force on the twentieth day of its publication in the Official Journal of the
European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Strasbourg, 21 April 2004.

For the European Parliament

The President

P. COX

For the Council

The President

D. ROCHE