CELEX: 51989PC0417(01)
Language: en
Date: 1989-09-08
Title: PROPOSAL FOR A COUNCIL REGULATION ( EEC ) AMENDING 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

COMMISSION OF THE EUROPEAN COMMUNITIES
                                             C0MC89) 417 final
                                             Brussels,   8   September 1989
            Application of the competition rules to air     transport
                        (Memorandum from the Commission)
                                  Proposal for a
                            COUNCIL REGULATION (EEC)
           amending 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
                                  Proposal for a
                            COUNCIL REGULATION (EEC)
           amending Regulation (EEC) No 3976/87 on the application
     of Article 85(3) of the Treaty to certain categories of agreements
              and concerted practices in the air transport sector
                                  Proposal for a
                            COUNCIL REGULATION (EEC)
  on the application of Article 85(3) of the Treaty to certain categories
      of agreements and concerted practices in the air transport sector
                          (presented by the Commission)
 ---pagebreak---                                                          &vv\ t/'l'Vj*
               MEMORANDUM FROM THE COMMISSION TO THE COUNCIL
Subject: application of the competition rules to air transport
Backfirouncj
1.     In 1981 the Commission made a proposal to the Council for a
      Regulation laying down the procedures for the application of the
      competition rules to air transport,    and included within the scope
      of   the   regulation   international   air   transport  with    third
      countries . In the course of the discussions of this proposal in
      the Council it became clear that in order to reach agreement on
      the Commission's proposal it would be necessary to restrict its
      scope   to  international  air transport    within the  Community, *a
                                                                 2
                                                                           is
      change which was made at the time of Memorandum No 2 and was
                                                                           .3
      incorporated in Article 1(2) of Regulation (EEC) No 3975/87'
      adopted on 14 December 1987 in the context of the first civil
      aviation package.
2.      In its judgment of 11 April 1989 in Case 66/86 the Court of
      Justice confirmed its judgment in the "Nouvelles Frontière case"
      as regards the application of Article 85 of the Treaty and ruled
      that Article 86 is directly applicable by national courts, even in
      the absence of an applicable regulation under Article 87 or of
      action by a Member State cartel authority or by the Commission
       (under Article   88  or Article    89 respectively).    The   Court's
       judgment means that where a dominant airline succeeds,       other by
       normal competitive means,    in eliminating competition,    even on a
   OJ No C 291, 12.11.1981,
   COM(84) 72 final of 15.3.1984.
   OJ Mo L 374, 31.12.1987.
   Judgment of 30 April 1986 in Joined Cases 289-213/84.
 ---pagebreak---                                     - 2 -
     domestic or on a Community-third country route,       this behaviour is
     to be considered an abuse.     Since there is no block exemption for
     airlines to discuss,      let alone agree,    fares on Community-third
     country routes,      the elimination of price competition resulting
     from such discussions or agreements is liable to be an abuse of
     the dominant or joint dominant position which in most instances
     exists on such routes. The Court also ruled that a Member State is
     in breach of its Treaty obligations if it approves fares which
     infringe     Article 85 or Article 86.     Such would be the case for
     instance where a uniform agreed price structure has resulted from
     consultations which have not been exempted pursuant to Article
     85(3).
3.    Since,   in respect of both domestic and of EC-third country air
     transport, the Commission is not in a position to grant exemptions
     under Article 85(3) nor to use normal procedures to rule on abuses
     of dominant position under Article 86,       there is now a climate of
     serious uncertainty      in which   air carriers     do not   know what
     practices and arrangements they may legitimately engage in on such
     routes.    If,   even by accident,   they act unlawfully, they run the
      risk of actions in national courts leading to the payment of
      compensation.      Moreover,     Member    States    face    comparable
      uncertainties when approving the fares filed by carriers on such
      routes.    In order to establish a framework of certainty,           the
      Council should now give the Commission the necessary powers to
      clarify   how   Articles   85  and   86  apply   to   domestic   and  to
      extra-Community air transport.
4.    The   Commission   accordingly   proposes   that   the   Council   adopt
      three Regulations.
 4.1. The first Regulation (Annex I) would modify Council Regulation
       (EEC) No 3975/87 in two ways:
       (i) deletion of Article 1(2) which contains the limitation on its
            scope of application.
                                                                 3
 ---pagebreak---                                                               - 3 -
           The Commission                       points out           that Community   competition   law
           would only apply where there is an effect on trade between
           Member States.                      Such an effect would have to be determined on
           a case by case basis.
     (ii) addition of an Article providing for consultations and, where
           necessary, negotiations under Council directives in the event
            of a conflict between Community                                competition law and third
            country         legislative                     or regulatory    provisions or    with  the
           provisions of air service agreements between Member States
            and third countries.
4.2. The second Regulation (Annex II) would amend Council Regulation
      (EEC)   No     3976/87                 to           include   within   its  scope   domestic  air
     transport. On the basis of the power granted to it, the Commission
     would extend the block exemption                                   for slot allocation to cover
     domestic air transport.                               The Commission would examine whether and
      if so how far it was also appropriate to grant block exemptions
      for other         inter-airline cooperative activities in the area of
     domestic air transport.                                 The duration of such block exemptions
      would be     the same                     as for the other block exemptions               granted
      pursuant to Regulation No 3976/87.
4.3. The third Regulation (Annex III) would empower the Commission to
      grant block            exemptions for                     airline agreements,      decisions   and
      concerted      practices                       in respect       of international   air transport
      between the Community and third countries and concerned with the
      joint planning and coordination of capacity,                                    revenue pooling,
      joint preparation                      of proposals on passenger tariffs and cargo
      rates and slot allocation at airports.
                                                                                                       5
      This third Regulation is similar to Council Regulation 3976/87
      but contains in addition a provision (Article 7(4)) to deal with
      the special situation which may occur where breaches of conditions
      or obligations or effects incompatible with Article 85(3) are the
      result of actions or provisions adopted by third countries or of
      provisions contained                              in air    service agreements between      Member
       States and third countries.
 5 OJ No L 374, 31.12.1987, p. 9.
                                                                                                V
                w w i i w w i w w w i U i j m |i II ,1,1,
 ---pagebreak---                                     - A -
5.    The Commission recognizes that restrictions of         competition on
     routes between the Community and third countries are likely in
     general   to   have  less direct     distortive   effects   within  the
     Community    than  restrictions   on  routes   within  the   Community.
     Moreover, in the case of extra-Community routes, the       Community is
     bound to take account of existing international agreements and of
     the  need     to  seek   to  settle    international   differences   by
     consultation and negotiation.
     The Commission,     therefore,   intends to adopt,    on the basis of
     powers to be granted to it by the proposed Council Regulation,       an
     implementing regulation in which the conditions and obligations
     attached to the exemptions will be less strict and thus afford
     more scope for cooperation between air carriers than those of
     Commission Regulation (EEC) No 2671/88 of 26 July 1988 , which is
     the corresponding block exemption regulation applicable          in the
     case of intra-Community international air transport.
 6 OJ No L 239, 30-8.1988, p. 9.
 ---pagebreak---                                                                         ANNEX I
                               Proposât for. a
                          COUNCIL REGULATION (EEC)
           amending . 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
    THE COUNCIL OF THE EUROPEAN COMMUNITIES,
    Having      regard   to  the  Treaty     establishing    the   European     Economic
    Community, and in particular to Article 87 thereof.
    Having regard to the proposal from the Commission'r
    Having regard to the opinion of the European Parliament2,
    Uhereas Council Regulation (EEC) No 3975/87 of 14 December 19873 formed part of a package of
     interrelated measures adopted by the Council as a first step towards
    completing the internal market          in transport;     whereas its scope was
     accordingly limited to international air transport between Community
     airports;
     Whereas,      therefore,    the   Commission   has no     «eans at      present    of
     investigating directly cases of suspected infringement of Articles 85
     and 86 of the Treaty in respect of air transport within a Member State
        1
         0J No C
        ^OJ No C
        3
         0J No L 374, 31.12.1987, p.1.
m*ÊÊi*mm>mm
 ---pagebreak---                                      - 2 -
or between a Community airport and an airport in a third country and
lacks   such powers    to  take   decisions   or   impose penalties     as are
necessary for it to bring to an end infringements established by it;
Whereas practices which       affect  competition    in these   areas of    air
transport   may  affect   trade between    Member States;      whereas   it is
therefore desirable that rules should be laid down under which the
Commission,    acting in close and constant liaison with the competent
authorities of the Member States, may take the requisite measures for
the application of Articles 85 and 86 of the Treaty to these areas of air transport;
Whereas there is a need to produce a secure and clear legal framework
for   international   air   transport   between   the   Community   and   third
countries and for domestic air transport within a Member State,           while
ensuring a coherent application of the competition rules;               whereas
therefore the scope of          Regulation       (EEC) No 3975/87 should be
extended to these other areas of air transport;
Whereas,   in view of the characteristics of international air transport
between the Community and third countries,        account should be taken of
the fact that the application to such transport of the provisions of
 Regulation      "(EEC)      No>   3975/87 may    in some    cases result    in
conflicts with the laws and rules of third countries or with provisions
contained     in     international agreements between Member States and
third   countries   applicable    to   services   on   the  route   or   routes
concerned;    whereas provision should be made for appropriate action to
be taken with a view to resolving such conflicts in accordance with
Community interests and with Community obligations under international
 law;
HAS ADOPTED THIS REGULATION:
 ---pagebreak---                                     - 3 -
                                 Article i
Regulation (EEC) No 3975/87 is amended as follows:.
1.  The second paragraph of Article 1 shall be deleted.
2
  - The fotlowing new -Article shall be inserted:
                                       Article 18a
                          Conflicts of international lau
        1. Where the application of this Regulation         in a particular
           case is liable to lead to a conflict with provisions laid
           down by law,   regulation or administrative action of a third
           country,   the Commission shall, at the earliest opportunity,
           hold with the competent authorities of the country concerned
           consultations    aimed    at   resolving   the  conflict.     The
           Commission shall inform the Advisory Committee referred to
           in Article 8 of the outcome of these consultations.
        2. Where the Commission       finds that the application     of this
           Regulation   in a particular case is liable to lead to a
           conflict with the provisions of an international agreement
           between a Member State and a third country,       it shall, after
           consulting the Advisory Committee referred to in Article 8,
           notify the Member State concerned of this finding.            The
           Member State shall,      within three months of the receipt of
           such notification,     inform the Commission of the measures it
           intends to take with a view to resolving the conflict.
        3. Where agreements with third countries need to be negotiated
           by the Community,    the Council,     acting on a proposal by the
           Commission,    shall    authorize the    Commission  to  open the
           necessary negotiations."
                                                                       f
 ---pagebreak---                                  - A -
                               Article 2
This Regulation shall enter into force on the day          following that of its
publication in the Official Journal of the European Communities.
This  Regulation  shall  be  binding   in  its  entirety   and   directly
applicable in all Member States.
Done at Brussels,               for               the Oxncil
 ---pagebreak---                                                                        ANNEX II
                        .Pr.opoeal. for a
                     COUNCIL REGULATION (EEC)
              amending Regulation (EEC) No. 3.976/87
       on   the application of Article 85(3) of the Treaty to certain
               categories of agreements and concerted practices
                          in the air transport sector
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having    regard    to  the    Treaty     establishing      the   European     Economic
Community, and in particular to Article 87 thereof.
Having regard to the proposal from the Commission ,
                                                                     2
Having regard to the opinion of the European Parliament ,
Whereas the scope of Council Regulation (EEC) No 3976/87 of
 14 December 1987     was .limited to international air transport-between Comnunity airports;
Whereas    the   Commission    should     be   enabled    to grant     similar    block
exemptions      for   agreements      between     undertakings,         decisions     by
associations of undertakings and concerted practices related to air
transport within a Member State;
   OJ No C
    >J No C
  3
   0J No L 374, 31.12.1987, p.9.
                                                                           AO
 ---pagebreak---                                    - 2 -
HAS ADOPTED THIS REGULATION:
                                Article 1
The word "international" shall be deleted      in Article      l of
Regulation (EEC) No 3976/87.
                                Article 2
This Regulation shall    enter   into force on the day following that of its
publication in the Official Journal of the European Communities.
This  Regulation  shall   be   binding   in its   entirety     and   directly
applicable in all Member States.
                                              For the
Done at Brussels,                                       Council
                                                                  AS)
 ---pagebreak---                                                       AHNSX III
                       Proposal for a
                  COUNCIL REGULATION (EEC)
      on the application of Article 85(3) of the Treaty to certain
            categories of agreements and concerted practices
                    in the air transport sector
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having  regard   to  the  Treaty  establishing  the  European   Economic
Community, and in particular to Article 87 thereof,
Having regard to the proposal from the Commission ,
                                                        2
Having regard to the opinion of the European Parliament ,
Whereas Council Regulation (EEC) No 3975/87 ,     as amended by
Regulation No        lays down the procedure for the application of the
rules on competition to undertakings in the air transport sector;
Whereas Article 85(1) of the Treaty may be declared inapplicable to
certain categories of agreements,     decisions and concerted practices
which fulfil the conditions contained in Article 85(3);
1
  OJ No C
2
  OJ No C
3
  OJ No L 374, 31.12.1987, p. 1
4
  see page ... of this Official Journal.
                                                                AZ
 ---pagebreak---                                       - 2 -
 Whereas common provisions for the application of Article 85(3) should
 be adopted by way of Regulation pursuant           to Article 87;     whereas,
 according to Article 87(2)(b), such a Regulation must lay down detailed
 rules for the application of Article 85(3),          taking into account the
 need to ensure effective supervision,       on the one hand, and to simplify
 administration to the greatest possible extent,        on the other; whereas,
 according to Article 87(2)(d),     such a Regulation is required to define
 the respective functions of the Commission and of the Court of Justice;
 Whereas international air transport between the Community           and third
 countries is at present governed by a network of international and
 bilateral agreements between Member States and third countries; whereas
 many of these agreements encourage or allow air carriers to cooperate
 in  matters  of   commercial   importance;      whereas   in observing   these
 agreements air    carriers should    not infringe     the Treaty's compe-
tition rules,   which apply fully to all air transport activities within
 the scope of Community law;     whereas the application of the competition
 rules must nevertheless take account          of obligations under existing
 international    treaties    and    of    the    desirability   of    settling
 international disputes by consultation and negotiation;           whereas air
 carriers should be enabled to conduct their business within a framework
 of reasonable certainty in relation to the competition rules;
 Whereas the Commission should therefore be enabled to declare by way of
 Regulation that the provisions of Article 85(1) do not apply to certain
 categories    of   agreements     between    undertakings,     decisions    by
 associations of undertakings and concerted practices;
 Whereas it is desirable,       in particular,      that block exemptions be
 granted for certain categories of agreements,         decisions and concerted
 practices;   whereas the Commission,       in close liaison with the Member
 States,    should   be  able  to   define precisely      the scope   of  these
 exemptions and the conditions attached to them;
 Whereas there can be no exemption if the conditions set out in Article
 85(3) are not satisfied;     whereas the Comission should therefore have
 power to take the appropriate measures where an agreement proves to
                                                                  AS
 ---pagebreak---                                    - 3 -
have effects incompatible with Article 85(3);     whereas the Commission
should consequently be able first to address recommendations to the
parties and then to take decisions;
Whereas this Regulation does not prejudge the application of Article 98
of the Treaty;
HAS ADOPTED THIS REGULATION:
                                 Article 1
 This Regulation shall apply to international air transport between the
 Community and third countries.
                                  Article 2
      Without prejudice to the application of Regulation (EEC) No 3975/87
     ^ahd<in accordance with Article 85(3) of the Treaty,    the Commission
      may by "regulation declare that Article 85(1) shall not apply to
      certain categories of agreements between undertakings, decisions of
      associations    of   undertakings    and  concerted    practices   on
      international air routes between the Community      and one or more
      third countries.
  2.  The Commission may, in particular adopt such regulations in respect
       of agreements, decisions or concerted practices which have as their
       object any of the following:
       - joint planning and coordination of the capacity on scheduled air
         services,
       - sharing of revenue from scheduled air services,
       - joint preparation of proposals on tariffs,      fares,   rates and
         conditions for the carriage of passengers,   baggage and cargo on
         scheduled services,
                                                              *y
 ---pagebreak---                                     - A-
     - slot allocation at airports and airport scheduling.
3.  Without prejudice to paragraph 2, such Commission regulations shall
    define    the  categories  of   agreements,   decisions   or  concerted
    practices to which they apply and shall specify in particular:
     (a) the restrictions or clauses which may,     or may not,   appear in
         the agreements, decisions and concerted practices;
     (b) the   clauses   which must   be  contained   in  the   agreements,
         decisions and concerted practices,      or any other conditions
     /   which must be satisfied;
     (c) the routes to which they apply.
                                 Article 3
1.  A regulation pursuant to Article 2 shall be made for a specified
    period.
2.   It may be repealed or amended where circumstances . have changed with
    respect to any factor which was basic to its being made;        in such
     case,   a period shall be fixed for modification of the agreements
     and concerted practices to which the earlier Regulation applies.
                                 Article 4
Regulations adopted pursuant to Article 2 may include a provision that
they   apply with    retroactive  effect  to agreements,    decisions and
concerted practices which were in existence at the date of the entry
into force of such Regulations.
                                                                AS
 ---pagebreak---                                      - 5-
                                  Article 5
Before adopting a regulation,        the Commission shall publish a draft
thereof and invite all persons and organizations concerned to submit
their comments within such reasonable time limit,      being not less than
one month, as the Commission shall fix.
                                   Article 6
The Commission shall consult the Advisory Committee on Agreements and
Dominant Positions in Air Transport established by Article 8(3) of
Regulation (EEC) No 3975/87 before publishing any such draft Regulation
 and before adopting any such Regulation.
                                    Article 7
 1.  Subject to paragraph 4,     where the persons concerned are in breach
     of a condition or obligation which attaches to an exemption granted
     by a Regulation adopted pursuant to Article 2,      the Commission may,
      in order to put an end to such a breach:
      - address recommendations to the persons concerned, and
     -   in the   event  of   failure   by  such persons   to  observe those
        recommendations,    and  depending on the gravity of the breach
        concerned,   adopt a decision that either prohibits        them from
        carrying out,   or requires them to perform,      specific acts or,
        while withdrawing the benefit of the block exemption which they
        enjoyed,  grants them an individual exemption in accordance with
        Article 4(2) of Regulation       (EEC) No 3975/87 or withdraws the
        benefit of the block exemption which they enjoyed.
 2.  Subject to paragraph A,      where the Commission,    either on its own
     initiative or at the request of a Member State or of natural or
     legal persons claiming a legitimate interest,        finds that in any
     particular case an agreement,        decision or concerted practice to
     which a block exemption granted by a regulation adopted pursuant to
                                                                4Ç>
 ---pagebreak---                                     - 6 -
    Article   2(2)    applies,    nevertheless    has   effects    which   are
    incompatible with Article 85(3) or are prohibited by Article 86, it
    may  withdraw    the  benefit   of   the  block   exemption   from   those
    agreements,   decisions or concerted practices and take, pursuant to
    Article 13 of Regulation (EEC).$o> 3975/87, all appropriate measures
    for the purpose of bringing these infringements to- an end.
    Before taking a decision under paragraph ,2,         the Commission may
    address recommendations for termination of the infringement to the
    persons concerned. .•'."*
                      **               .            '              *
    To the extent that'the situation referred to in paragraph 1 or in
    paragraph 2 results from provisions laid down by law, regulation or
    administrative action of a third country or from the provisions of
    an air service agreement       between a Member      State and a4 third
    country,   the Commission shall, before withdrawing the benefit of
    the block   exemption,    take appropriate     action   as specified    in
    Article 18a of Regulation (EEC) No.3975/87*
                                  Article S
This Regulation    shall enter    into   force on the day following that of its
publication in the Official Journal of the European Communities.
This  Regulation    shall  be   binding    in  its   entirety   and   directly
applicable in all Member States.
Done at Brussels,                                 For the : Council
                                                                  /T-3
 ---pagebreak---  ---pagebreak---                                                                      ISSN 0254-1475
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