Explanatory note with regard to the definition of a parent carrier in Regulation (EC) No 80/2009 of the European Parliament and of the Council on a Code of Conduct for computerised reservation systems and repealing Council Regulation (EEC) No 2299/89
Date: 2009-03-06
Institutions: European Commission
Subjects: Court of Justice of the European Union, air transport, carrier, computer system, occupational status, rail transport

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Official Journal of the European Union

6.3.2009

Explanatory note with regard to the definition of a ‘parent carrier’ in Regulation (EC) No 80/2009
of the European Parliament and of the Council on a Code of Conduct for computerised reservation
systems and repealing Council Regulation (EEC) No 2299/89

(2009/C 53/02)

Introduction

1. Regulation (EC) No 80/2009 of 14 January 2009 replaces
Regulation (EEC) No 2299/89 on a code of conduct for
computerised reservation systems (mentioned below as
‘CRS’). One of the elements that have changed with regard
to Regulation (EEC) No 2299/89 is the definition of a
‘parent carrier’ of a CRS. This note aims to clarify to market
participants the meaning of the new definition and to indi-
cate how the Commission services would determine the
status of an air carrier or rail-transport operator with
respect to this definition.

2. This explanatory note is without prejudice of the applica-

tion of Articles 81 and 82 of the Treaty.

3. This explanatory note is without prejudice to the definition
of a parent carrier which may be given by the Court of
Justice.

1. THE DEFINITION OF A ‘PARENT CARRIER’

4. Article 2 of Regulation (EC) No 80/2009 defines a parent
carrier as follows. The definitions of a participation in the
capital and of control add further clarification:

— ‘Parent carrier’ means any air carrier or rail-transport
operator which directly or indirectly, alone or jointly
with others, controls or participates in the capital with
rights or
representation on the board of directors,
supervisory board or any other governing body of a
system vendor, as well as any air carrier or rail-trans-
port operator which it controls,

— ‘Control’ means a relationship constituted by rights,
contracts or any other means which, either separately or
in combination and having regard to the considerations
of fact or law involved, confer the possibility of exer-
cising decisive influence on an undertaking, in particu-
lar by:

— ownership or the right to use all or part of the

assets of an undertaking,

— rights or contracts which confer a decisive influence
on the composition, voting or decisions of
the
organs of an undertaking,

— ‘Participation in the capital with rights or representation
on the board of directors, supervisory board or any
other governing body of a system vendor’ means an
investment to which are attached rights or representa-

tion on the board of directors, supervisory board or any
other governing body of a system vendor, and confer-
ring the possibility of exercising, alone or jointly with
others, decisive influence on the running of the busi-
ness of the system vendor.

5. These definitions refer to the various means conferring the
possibility to exercise decisive influence on the running of
the business of the system vendor, with a special emphasis
on the participation in the capital. Indeed, the definition of
‘control’ covers situations where ownership confers the
possibility of exercising decisive influence on the system
vendor. But the definition of a ‘parent carrier’ in the Code
of Conduct adds an explicit reference to the participation in
the capital of a system vendor, to the linked rights or the
representation on a governing body and to the decisive
influence the participation may confer to the air carrier or
rail-transport operator over the running of the business of
the system vendor.

2. ASSESSMENT OF THE PARENT CARRIER STATUS

6. The concepts of

‘control’ and ‘decisive influence’ stand
central in the definition of a parent carrier. The definition
of ‘control’ as provided by Article 2 of Regulation (EC)
No 80/2009 is identical to the definition of control given
in Article 3(2) of Regulation (EC) No 139/2004 of
20 January 2004 on the control of concentrations between
undertakings (‘the EC merger regulation’) (1). It follows that
the concepts of ‘control’ and ‘decisive influence’ must be
interpreted in the same way as in the Commission Consoli-
dated Jurisdictional Notice published in the Official Journal of
the European Union C 95 of 16 April 2008, in particular
Chapters II.2 and II.3. The following will point out the
main concepts of relevance for the purposes of Regulation
(EC) No 80/2009.

2.1. Means of acquiring decisive influence

7. Control is defined as the possibility of exercising decisive
influence on an undertaking. It is not necessary that the
decisive influence is or will be actually exercised. The possi-
bility of decisive influence can be acquired by various
means, such as:

1. Participation in the capital: the most common means for
the acquisition of control or decisive influence is the
shares, possibly with a shareholders'
acquisition of

(1) OJ L 24, 29.1.2004, p. 1.

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agreement in cases of joint control, or the acquisition of
assets. A participation in the capital may be acquired,
either by direct investment or indirectly via an owner-
ship stake in a company directly invested in the system
vendor. The attached rights or a representation on the
board or on any other governing body may give the
investor the possibility of exercising decisive influence,
i.e. the possibility for the shareholder either to take deci-
sions or to block decisions with regard to the running
of the business of the system vendor;

2. Contracts: decisive influence can also be acquired on a
contractual basis. In order to confer decisive influence,
such contracts must lead — over a long period — to a
similar control of the management and the resources of
the system vendor as in the case of acquisition of shares
or assets. In addition to transferring control over the
management and the resources, such contracts must be
characterised by a very long duration;

3. Any other means: purely economic relationships may play
the acquisition of control. For
a decisive role for
example, a very important long-term supply agreements
or credits provided by suppliers or customers could,
under certain circumstances, confer a decisive influence
over the system vendor.

2.2. The case of the single parent carrier

8. One single air carrier or rail-transport operator may exer-
cise decisive influence over a system vendor. Two general
situations can be distinguished in which an undertaking has
such sole control. First, the solely controlling undertaking
enjoys the power to determine the strategic commercial
decisions of
typically
the undertaking. This power
achieved by the acquisition of a majority of voting rights.
In this context, decisive influence means the power to take
decisions with regard to the strategic commercial behaviour
of the undertaking. Second, a situation also conferring sole
control exists where only one shareholder is able to veto
strategic decisions in an undertaking, but this shareholder
does not have the power, on his own, to impose such deci-
sions (the so-called negative sole control). In these circum-
stances, decisive influence refers to the power to block the
adoption of strategic decisions.

is

9. Sole control can be acquired on a de jure and/or de facto

basis.

10. Sole control is normally acquired on a de jure basis where
an undertaking acquires a majority of the voting rights of a
company. Even in the case of a minority shareholding, sole
control may occur on a legal basis in situations where
specific rights are attached to this shareholding (e.g. the
power to appoint more than half of the members of the
supervisory board or the administrative board).

11. A minority shareholder may also be deemed to have sole
control on a de facto basis, for example where, on the basis
of its shareholding, the historic voting pattern at the share-

holders' meeting and the position of other shareholders, a
minority shareholder is likely to have a stable majority of
the votes at the shareholders' meeting. This depends on the
factors such as the dispersion of the remaining shares, the
structural and economic links between shareholders and
the strategic interests of other shareholders in the company.
Such criteria need to be assessed on a case-by-case basis
and taking account of foreseeable changes of the share-
holders' presence which might arise in the future following
a modification in the system vendor's control and owner-
ship structure.

2.3. The case of multiple parent carriers

12. Several air carriers and/or

rail-transport operators may

share decisive influence on a system vendor.

13. The clearest form of such joint control exists where there
are only two parent companies which share equally the
voting rights in the system vendor. But
joint control
may exist even where there is no equality between the
two parent companies in votes or in representation in
decision-making bodies or where there are more than two
parent companies. This is the case where minority share-
holders have additional rights which allow them to block
decisions which are essential for the strategic behaviour of
the joint venture. These veto rights may be set out in the
the joint venture or conferred by agreement
statute of
between
shareholders'
its
agreement).

companies

parent

(e.g.

14. These veto rights must be related to strategic decisions on
the business policy of the company. They must go beyond
the veto rights normally accorded to minority shareholders
interests in the joint
in order to protect their financial
venture. This normal protection of the rights of minority
shareholders is related to decisions on the essence of the
joint venture, such as changes in the statute, an increase or
decrease in the capital or liquidation.

15. In contrast, veto rights which confer control

typically
include decisions on issues such as the budget, the business
plan (insofar as it gives details which go beyond general
declarations concerning business aims), major investments
(insofar as the level of investment is not so high as to
render the veto right closer to the normal protection of the
interests of the minority shareholder) or the appointment
of senior management.

16. Even in the absence of specific veto rights, two or more
undertakings holding minority shareholdings in a system
vendor may obtain joint control. This may be the case
where the minority shareholders,
together, will have a
majority of
the voting rights and where they will act
together in exercising these voting rights. This can result
from a legally binding agreement to this effect, or it may be
established — exceptionally — on a de facto basis where
there is a strong commonality of
interests between the
concerned minority shareholders.

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17. With regard to minority ownerships,

it must be stressed
that the Code of Conduct aims to make a clear difference
between a purely financial participation in the capital of a
system vendor and a more active involvement of the air
carrier in the business of the system vendor. A prominent
involvement of an air carrier or rail-transport operator in
the decision process of the system vendor may create incen-
tives to influence the business decisions of
the system
vendor in a way that would distort competition in the air
or rail transport sector. With regard to the distribution of
its products, it may also create a significant incentive for
the ‘parent carrier’ to discriminate among CRSs in favour of
its own.

18. This distinction is important in the presence of air carriers
or rail-transport operators as minority shareholders of a
system vendor. If such participation provides rights to the
air carrier or rail-transport operator in question which go
beyond the rights normally accorded to minority share-
holders in order to protect their financial interests, or if the
air carrier or the rail-transport operator were able, alone or
jointly with other shareholders, to influence business deci-
sions of the system vendor with regard to other partici-
pating carriers, then it should be considered as a parent
carrier.

3. PROCEDURAL ISSUES

19. Acting on a complaint or on its own initiative,

Investigations will be carried out

the
Commission may investigate alleged infringements of the
Code of Conduct.
in
accordance with the principle of good administrative prac-
tice. For alleged infringements with regard to the obliga-
tions of parent carriers of a system vendor, the Commis-
sion's investigation will first assess whether the concerned
air carrier or rail transport operator is to be considered as a
parent carrier of the system vendor.

20. Article 14 of the Code of Conduct provides the Commis-
sion with all
investigation to
the necessary powers of
require the information needed for this assessment. Indeed,
the Commission may require undertakings or associations
to provide all necessary information,
of undertakings
including the provision of specific audits,
including on
issues covered by Article 10 which contains the obligations
of parent carriers.

21. In addition, Article 12 requires from each system vendor to
submit every four years an independently audited report
detailing the ownership structure and the governance
model. The Commission may also request such report at
any moment. Hence, Articles 12 and 14 allow the Commis-
sion to collect all pertinent information to assess the status
of the air carrier or rail-transport operator with regard to
the definition of a parent carrier.

22. Such assessment will typically be based on an analysis of
documents detailing the system vendor's ownership and
control
statutes or agreements
between shareholders.
It may also assess other relevant
documents such as minutes of meetings of the board or of
other governing bodies.

structure,

such as

its

23. If the air carrier or rail-transport operator is indeed identi-
fied as a parent carrier, the Commission will investigate the
the Code of Conduct by this
alleged infringements of
parent carrier. Article 16 of the Code of Conduct sets the
the protection of business
procedures and guarantees
secrets, which enhances
the Commission's capacity to
collect the needed information.

24. Where such infringement does indeed take place,

the
Commission may take the needed decision to bring the
infringement to an end. It may also fine the undertaking
responsible for the infringement of the Code of Conduct.