1 See Commissioner Karel Van Miert, Competition Policy in the Air Transport Sector (Mar. 9, 1998) (visited Oct. 12, 1998) <http://europa.eu.int/comm/dg04/speech/eight/en/ sp98035.htm> [hereinafter Van Miert Speech].
2 Joan M. Feldman, Alliances: Are We Making Money Yet?, Air Transport World, Oct. 1, 1995, at 24, available in 1995 WL 8100102.
3 See Come Fly With Me, Economist, June 20, 1998, available in LEXIS, News Library, MAGS File.
4 See Van Miert Speech, supra note 1.
5 Id.
6 See Feldman, supra note 2, at 24.
7 See Van Miert Speech, supra note 1. The airlines decide to cooperate on such matters as fares, frequencies, schedules, and relationships with travel agents. See id.
8 See id.; Carole A. Shifrin & Pierre Sparaco, American, BA Move Closer to Partnership European Commission Seeks to Preserve Competition in Setting Conditions for Mega-Alliances, Av. Wk. & Space Tech., July 13, 1998, available in 1998 WL 8144678.
9 See Come Fly With Me, supra note 3, at 69.
10 See Airline Alliances: Commission Announces Conditions for Take Off, EU Focus, July 16, 1998, at 2 [hereinafter Airline Alliances]. Other notable alliances that have come under investigation include: the “Star Alliance,” which combines United Airlines, Lufthansa German Airlines, Air Canada, Scandinavian Airlines System, Thai Airways International, and Varig Brazilian Airlines, the alliance between Northwest and KLM Royal Dutch Airlines, and the alliance among Sabena, Austrian Airlines, Swissair and Delta. See id.; see also Carole A. Shifrin, Proliferating Partnerships Face Increased Scrutiny, Av. Wk. & Space Tech., Nov. 17, 1997, available in LEXIS, News Library, MAGS File.
11 See Commission Notice Concerning the Alliance between British Airways and American Airlines, 1998 O.J. (C 239) 10 [hereinafter Commission Notice]; Airline Alliances, supra note 10, at 2. The final decision of the EU competition authorities is expected to come some time during the Fall of 1999. This final decision was not yet available as of the final revision of this Note for publication.
12 See Airline Alliances, supra note 10, at 2.
13 See Mercer H. Harz, Comment, Dominance and Duty in the European Union: A Look Through Microsoft Windows at the Essential Facilities Doctrine, 11 Emory Int’l L. Rev. 189, 192 (1997).
14 See Valentine Korah, An Introductory Guide to EC Competition Law and Practice 17 (6th ed. 1997).
15 See Nicholas Moussis, Access to European Union, Law, Economics, Policies 59 (7th ed. 1997).
16 See Korah, supra note 14, at 18.
17 See id.
18 See id.
19 See id. From 1993 to 1999, DG IV was headed by Karel Van Miert. See William Echikson, Van Miert is Shaking Up the EU with His Broad Antitrust Powers, Bus. Wk., Feb. 2, 1998, at 16, available in LEXIS, News Library, MAGS File. Mr. Van Miert is a Belgian in his mid-fifties who has been referred to as the EU’s “antitrust czar.” See id. During his term as head of DG IV, Van Miert expanded the Commission’s power to investigate mergers and joint ventures and simplified the review process for mergers and acquisitions. See id. He is described as “noisy and colorful” and has been accused by critics of blocking deals more for political reasons than because they would hamper competition. Id.
20 See Korah, supra note 14, at 21.
21 See Harz, supra note 13, at 192.
22 See id. at 193. The Court of First Instance was created by Council Dec. 88/591/ECSC, 1988 O.J. (L 319) 1, EEC and Euratom, and began operation in October 1989. See Korah, supra note 14, at 19 n.29.
23 See Moussis, supra note 15, at 61.
24 See Harz, supra note 13, at 192.
25 See Consolidated Version of the Treaty Establishing the European Community, 37 I.L.M. 79 (Jan. 1998), in effect since July 1, 1999 [hereinafter EC Treaty]. The EC Treaty was amended by the Treaty of Amsterdam amending the Treaty on European Union, the Treaties establishing the European Communities and certain related acts, Oct. 2, 1997, 1997 O.J. (C 340) 1, in effect since July 1, 1999 [hereinafter Treaty of Amsterdam]. The Treaty of Amsterdam reconfigured some of the numbering system in the EC Treaty. The Articles of the EC Treaty discussed in this Note that were affected by the new numbering system, and their former numbers, are as follows: Articles 81 (formerly 85), 82 (formerly 86), 83 (formerly 87), 84 (formerly 88), 85 (formerly 89), and 249 (formerly 189). Articles 2 and 3 of the EC Treaty, which are also discussed in this Note, were not affected by the reconfigured numbering system. Because the Treaty of Amsterdam amendments only recently went into effect on July 1, 1999, and because the sources used in this note—articles, books, ECJ cases—generally predate July 1, 1999, these sources use the former EC Treaty numbers for any Articles of the EC Treaty that they reference. For a version of the EC Treaty prior to the amendments and new numbering configurations made by the Treaty of Amsterdam, see Treaty Establishing the European Community, Feb. 7, 1992, 1992 O.J. (C 224) 1, [1992] 1 C.M.L.R. 573 (1992).
26 See EC Treaty, supra note 25, arts. 2, 3 and 81–85 (formerly articles 85–89).
27 See Council Regulation 3975/87 (laying down the procedure for the application of the rules on competition to undertakings in the air transport sector) 1987 O.J. (L 374) 1, as amended, 1992 O.J. (L 240) 18 [hereinafter Regulation 3975/87].
28 See EC Treaty, supra note 25, art. 2. The full text of Article 2 reads as follows:
The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.
Id.
29 Id.
30 See id. art. 3(1).
31 Id. art. 3(1)(g).
32 See EC Treaty, supra note 25, arts. 81 and 82; Scott Kimpel, Antitrust Considerations in International Airline Alliances, 63 J. Air L. & Com. 475, 497 (1997).
33 The term “undertaking” in the EU competition laws discussed in this Note means an entity such as a firm, corporation, company, or a group of companies, etc. See Korah, supra note 14, at 338.
34 EC Treaty, supra note 25, art. 81(1). The full text of Article 81(1) reads as follows:
The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Id.
35 See id. art. 82.
36 Id. The full text of Article 82 is as follows:
Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States. Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Id.
37 See EC Treaty, supra note 25, art. 82.
38 Id.
39 Case 6/72, Europemballange Corporation and Continental Can Company Inc. v. Commission, 1973 E.C.R. 215, [1973] Part 68 C.M.L.R. 199, 224 (1973)[hereinafter Continental Can]. Please note that all ECJ pinpoint cites here and following are made to the C.M.L.R.
40 Case 66/86, Ahmed Saeed Flügreisen and Silver Line Reisebüro GmbH v. Zentrale zur Bekämpfung Unlauteren Wettbewerbs eV, 1989 E.C.R. 803, [1990] 4 C.M.L.R. 102, 134 (1989)[hereinafter Ahmed].
41 See Case 85/76, Hoffmann-La Roche & Co. AG v. Commission, 1979 E.C.R. 461, [1979] 3 C.M.L.R. 211, 299 (1979) [hereinafter Hoffmann-La Roche].
42 See Continental Can, [1973] Part 68 C.M.L.R. at 224.
43 See id. at 217; Case 27/76, United Brands Company and United Brands Continental BV v. Commission, 1978 E.C.R. 207, [1978] 1 C.M.L.R. 429, 497 (1978)[hereinafter United Brands].
44 Article 249 (formerly Article 189) of the EC Treaty provides five forms of legal acts which can be adopted by the Council and the Commission: 1) Regulation; 2) Directive; 3) Decision; 4) Recommendations; and 5) Opinions. A Regulation “has a general scope, is binding in all its elements and is directly applicable in each Member State.” A Directive “binds any Member State to which it is addressed with regard to the result to be achieved, while leaving the national authorities jurisdiction as to the form and methods used.” A Decision “is binding on the addressees it indicates, who may be one, several, or even all the Member States or one or more natural or legal persons.” A Recommendation “suggests a certain line of conduct.” An Opinion assesses “a current situation or certain facts in the Community or the Member States.” EC Treaty, supra note 25, art. 249; see also Moussis, supra note 15, at 43–44.
45 EC Treaty, supra note 25, art. 83.
46 See id. art. 84.
47 Id. art. 85.
48 See Regulation 3975/87, supra note 27; European Commission, XXVIIth Report on Competition Policy, (1997)(Published in conjunction with the General Report on the Activities of the European Union–1997)(visited Oct. 12, 1998) <http://europa.eu.int/comm/dg04/ public/en/broch97.pdf> [hereinafter Report on Competition Policy].
49 See id.
50 See EC Treaty, supra note 25, art. 85; Ahmed, [1990] 4 C.M.L.R. at 131; Report on Competition Policy, supra note 48, at 32.
51 Report on Competition Policy, supra note 48, at 32.
52 See id.
53 See id.; EC Treaty, supra note 25, art. 85.
54 United Brands, [1978] 1 C.M.L.R. at 486–87; Hoffmann-La Roche, [1979] 3 C.M.L.R. at 274. Since United Brands, the ECJ has defined a “dominant position” in this manner in all its judgments dealing with Article 82. See Korah, supra note 14, at 77. In the original text of all of the cases discussed in this section, the court was referring to Article 86, the former number for what is now numbered Article 82.
55 Hoffman-La Roche, [1979] 3 C.M.L.R. at 283–84. Please note that in the original text of all of the cases discussed in this section, the courts were referring to Article 86, the former number for what is now Article 82.
56 Id. at 274–75.
57 Case 322/81, Nederlandsche Banden-Industrie Michelin N.V. v. Commission, 1983 E.C.R. 3461, [1985] 1 C.M.L.R. 282, 327 (1983)[hereinafter Michelin].
58 See id. at 320–23. See also Hoffman-La Roche, [1979] 3 C.M.L.R. at 277; Ahmed, [1990] 4 C.M.L.R. at 135.
59 See id.
60 See Michelin, [1985] 1 C.M.L.R. at 322.
61 See id. at 320–23. See also Hoffman-La Roche, [1979] 3 C.M.L.R. at 277; Ahmed, [1990] 4 C.M.L.R. at 135.
62 See Hoffman-La Roche, [1979] 3 C.M.L.R. at 277; Michelin, [1985] 1 C.M.L.R. at 323.
63 See Hoffman-La Roche, [1979] 3 C.M.L.R. at 275. See, e.g. Case C-62/86, AKZO Chemie BV v. Commission, 1991 E.C.R. 3359, [1993] 5 C.M.L.R. 215, 279 (1991) [hereinafter AKZO]; Michelin, [1985] 1 C.M.L.R. at 326; United Brands, [1978] 1 C.M.L.R. at 489–90.
64 Hoffman-La Roche, [1979] 3 C.M.L.R. at 275. The court continued this general statement with the following illustration using the facts of the case:
An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for—without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share—is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position.
Id.
65 United Brands, [1978] 1 C.M.L.R. at 489.
66 See id. at 489–90. The court’s illustration, using specific facts of the case, was as follows:
[I]t can be considered to be an established fact that UBC’s share of the relevant market is always more than 40 per cent and nearly 45 per cent. This percentage does not however permit the conclusion that UBC automatically controls the market. It must be determined having regard to the strength and number of the competitors. It is necessary first of all to establish that on the whole of the relevant market the said percentage represents grosso mondo a share several times greater than that of its competitor Castle and Cooke which is the best placed of all the competitors, the other coming far behind. This fact together with the others to which attention has already been drawn may be regarded as a factor which affords evidence of UBC’s preponderant strength.
Id.
67 See Michelin, [1985] 1 C.M.L.R. at 326.
68 See Ahmed, [1990] 4 C.M.L.R. at 135.
69 Id.
70 Id.
71 United Brands, [1978] 1 C.M.L.R. at 502; see also AKZO, [1993] 5 C.M.L.R. at 281 (“Article [82] prohibits a dominant undertaking from eliminating a competitor and thereby strengthening its position by using methods other than those which come within the scope of competition on the basis of quality.”).
72 Continental Can, [1973] Part 68 C.M.L.R. at 225.
73 See Hoffman-La Roche, [1979] 3 C.M.L.R. at 299.
74 See id. at 289 (“undertaking which is in a dominant position on a market and ties purchasers—even if it does so at their request—by an obligation or promise on their part to obtain all or most of their requirements exclusively from the said undertakings abuses its dominant position within the meaning of Article [82]”).
75 See AKZO, [1993] 5 C.M.L.R. at 281 (“[P]rices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor. Such prices can drive from the market undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable of withstanding the competition waged against them.”).
76 See United Brands, [1978] 1 C.M.L.R. at 500–01 (“policy of differing prices [depending on the circumstances of the Member State] enabling UBC to apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, was an abuse of a dominant position”).
77 See id. at 491–94 (contract restriction by large banana producer (UBC) with 45% market share which imposed on ripener/distributors obligation not to resell bananas not fully ripened and restricting sales by ripener/distributor only to retailers found to be abuse of dominant position).
78 See Michelin, [1985] 1 C.M.L.R. at 330–31 (“loyalty rebate, which by offering customers financial advantages tends to prevent them from obtaining their supplies from competing manufacturers, amounts to an abuse within the meaning of Article [82]”).
79 See Commission Notice, supra note 11, at 10.
80 See Michele McDonald, Pending Open Skies, American, BA Plan Major Code-Sharing Alliance; International Alliance Between American Airlines Inc. and British Airways PLC, Travel Wkly., June 13, 1996, available in LEXIS, News Library, MAGS File.
81 See Carole A. Shifrin, Transatlantic Pact Hostage to Heathrow Access, Av. Wk. & Space Tech., June 17, 1996, available in LEXIS, News Library, MAGS File.
82 See id.
83 See id.
84 See id.
85 See id.
86 See Shifrin, supra note 81.
87 See Van Miert Speech, supra note 1.
88 Come Fly With Me, supra note 3.
89 See Van Miert Speech, supra note 1.
90 See id.
91 See Shifrin, supra note 81; Come Fly With Me, supra note 3; McDonald, supra note 80; Courting, Economist, July 13, 1996, available in LEXIS, News Library, MAGS File; Four Trans-Atlantic Alliances Hold 57% of North Atlantic: Study, World Airline News, July 29, 1996, available in 1996 WL 8067642.
92 See McDonald, supra note 80.
93 See Shifrin, supra note 81; Courting, supra note 91.
94 See Come Fly With Me, supra note 3.
95 See Shifrin, supra note 81.
96 See McDonald, supra note 80.
97 See Four Trans-Atlantic Alliances Hold 57% of North Atlantic: Study, supra note 91.
98 See Shifrin, supra note 81.
99 See id.
100 See supra notes 63–67 and accompanying texts.
101 See Van Miert Speech, supra note 1.
102 See supra notes 71–78 and accompanying texts.
103 See Commission Notice, supra note 11, at 10; Airline Alliances, supra note 10, at 2.
104 See id. After a brief period for comments, the Commission will issue its final decision, after which it is up to national authorities to make decisions in line with the Commission. See EU Decision Near on AA/BA; European Union, Alliance of American Airlines and British Airways; Brief Article, Air Transport World, July 1998, available in LEXIS, News Library, MAGS File.
105 Commission Notice, supra note 11, at 10. In the original text, the Commission’s actual references were to Article 85 (now Article 81) and Article 86 (now Article 82).
106 See id. at 10–11; Airline Alliances, supra note 10, at 2.
107 See Airline Alliances, supra note 10, at 2–3. For purposes of this discussion, the brief summary of the conditions provided in EU Focus will be used. The entire comprehensive conditions are laid out in the published opinion. See Commission Notice, supra note 11.
108 See Airline Alliances, supra note 10, at 2.
109 See id.
110 See id.
111 See id. at 3.
112 See EU Decision Near on AA/BA; European Union, Alliance of American Airlines and British Airways; Brief Article, supra note 104.
113 See Airline Alliances, supra note 10, at 3.
114 Alan R. Bender, Allied Airlines: The New Robber Barons?, Av. Wk. & Space Tech., June 22, 1998, available in 1998 WL 8144396. With respect to the authority of these statements, it should be noted that Alan R. Bender is an associate professor of aeronautical science at Embry-Riddle Aeronautical University, and he has been a student of U.S. airlines for more than 20 years. See id.
115 Id.
116 See generally Shifrin, supra note 10; Van Miert Speech, supra note 1; Come Fly With Me, supra note 3.
117 See Come Fly With Me, supra note 3.
118 See Shifrin, supra note 10.
119 See id.
120 See id.
121 See id.
122 See id.
123 See Shifrin, supra note 10.
124 See Shifrin, supra note 81; Come Fly With Me, supra note 3; Courting, supra note 91.
125 See Shifrin, supra note 81; Courting, supra note 91.
126 See Come Fly with Me, supra note 3.
127 See Shifrin, supra note 81.
128 See id.
129 Id.
130 Id.
131 Id.
132 See Shifrin, supra note 81.
133 See generally Commission Notice, supra note 11; Airline Alliances, supra note 10, at 2. Although beyond the scope of this Note, an interesting side note in this context is the more recent response to the BA/AA alliance from U.S. competition authorities. It is thus worth noting here that on July 30, 1999, the U.S. government rejected an application for antitrust immunity from American Airlines and British Airways. See U.S. Govt Rejects Antitrust Immunity for BA/AA, Airline Industry Info., Aug. 3, 1999, available in LEXIS, News Library, MAGS File.
134 See Shifrin & Sparaco, supra note 8.
135 Id.
136 Id.
137 See generally Shifrin & Sparaco, supra note 8; Van Miert Speech, supra note 1. When the British House of Commons Transport Select Committee decided against referring the BA/AA alliance to the Monopolies & Mergers Commission, all members of the House of Commons Transport Select Committee agreed that the BA/AA alliance should surrender slots at London airports. See James Ott, USAir Cries Foul at BA-American Pact, Av. Wk. & Space Tech., Aug. 5, 1996, available in LEXIS, News Library, MAGS File.
138 See Commission Notice, supra note 11, at 11–12; Airline Alliances, supra note 10, at 2–3.
139 See id.
140 See Commission Notice, supra note 11, at 16; Airline Alliances, supra note 10, at 2.
141 See EC Treaty, supra note 25, art. 85; Report on Competition Policy, supra note 48.
142 See Report on Competition Policy, supra note 48.
143 See id.
144 See id.
145 See id.