European Union: Fair Fares - Clarifications From The European Court

On 6 July 2017 the Court of Justice of the EU delivered a judgment clarifying two issues arising in connection with the provisions relating to air fares in EU Regulation 1008/2008, in the case of Air Berlin v BVVVB (the German Federal Union of Consumer Organisations and Associations).

The BVVVB had brought an action before the Landgericht Berlin claiming that two practices of Air Berlin relating to air fares were contrary to the applicable law:

  • the indication on its website of an amount in respect of taxes and charges which was higher than the amount actually payable by Air Berlin, and
  • the charging of a handling fee, of 25 euros per booking and per passenger, on the amount to be reimbursed to a passenger who has not taken a flight or has cancelled the booking.

The Landgericht upheld the claims, and, following the failure of its appeal to the Kammergeicht Berlin, Air Berlin appealed to the Bundesgerichtsh of, which referred two questions to the CJEU.

The laws in question

Regulation 1008/2008 consolidated, with some amendments, the previously applicable "third package" (Regulations 2407/92, 2408/92 and 2409/92). It re-enacted the basic provision in the third package liberalising air fares, providing, in Article 22, that "Community air carriers...shall freely set air fares and air rates for intra-Community air services". It also introduced, in Article 23, some regulatory measures, intended to ensure transparency of fares and to prevent passengers being misled. These include the requirement that the final price shall at all times be indicated and shall be all-inclusive, and, in the third sentence of Article 23(1), that "In addition to the indication of the final price, at least the following shall be specified:

  1. air fare or air rate;
  2. taxes;
  3. airport charges; and
  4. other charges, surcharges or fees, such as those related to security or fuel; where [such items] have been added to the air fare or air rate."

Also relevant in the proceedings was Paragraph 307 of the German Burgerliches Gesetzbuch (Civil Code), transposing into German law EU Directive 93/13 on unfair terms in consumer contracts, which provides that provisions in general terms and conditions are of no effect if they unreasonably disadvantage the contracting partner of the party using them, contrary to the requirements of good faith.

Unreasonable disadvantage is to be assumed to exist if a provision is incompatible with essential basic principles of the statutory rule from which it diverges, or if it restricts essential rights or obligations arising from the contract in such a way that achieving the purpose of the contract is jeopardised.

Indication of excessive amount of taxes and charges

Air Berlin had argued that, as the main purpose of the requirements in Article 23 of the EU Regulation is to enable customers to compare different prices offered by air carriers, only the final price is decisive, and that, if they are included wholly or partly in the final price, separate indication of the precise amount of taxes, charges etc is not required. However, the Court held that the obligation to specify taxes and charges is in addition to the obligation to indicate the final price, that the objective of information and transparency would not be achieved if carriers were to have a choice between including taxes and charges in the fare and indicating them separately, and that if they did this it would deprive the rule of all practical effect.

Air Berlin had also argued that the amount of taxes and charges is not always known at the time of booking, but the Court pointed out that most taxes and charges normally correspond to the amount the carrier is able to estimate at the time of booking, and that the obligation is to specify elements that are "foreseeable at the time of publication".

Consequently, the Court concluded that the third sentence of Article 23(1) of Reguation 1008/2008 is to be interpreted as meaning that, when publishing their air fares, carriers must specify separately the amount payable in respect of taxes, charges, surcharges and fees, and may not include them, even partially, in the air fare.

Charging of a handling fee

On the second question, the Court was concerned not with whether the charging of a handling fee was unfair and unenforceable, as this was a question for the national court, but rather whether the provision in EU Regulation 1008/2008 giving carriers freedom to determine their air fares precludes the application of national legislation to such effect.

The Court stated that EU Directive 93/13 is a consumer protection measure of general application to all sectors of economic activity, and would only not apply in the field of air services if this were clearly provided for, which is not the case, and that the objective of the EU fares liberalisation legislation was to eliminate price controls in order to open up the sector to competition, and that the legislation recognised that it was appropriate to complement this with adequate consumer safeguards.

Air Berlin had sought support from the Court's judgment of 18 September 2014 in a case concerning Vueling, in which the Court held that the fares freedom provisions precluded national legislation requiring carriers to include any checked baggage charges in the base price, rather than as a separate supplement. However, the Court distinguished this judgment, on the basis that it held that EU law does not preclude Member States from regulating aspects of the contract of carriage, without prejudice to consumer protection rules, and did not in any way hold that pricing freedom precludes the application of any consumer protection rule.

Consequently, the Court held that the pricing freedom provisions of Regulation 1008/2008 do not preclude application of national laws leading to a declaration of invalidity of a flat rate handling fee on reimbursement to a passenger who has not taken a flight or whose flight has been cancelled.

Comment

This is only the third occasion on which the CJEU has had to consider the fares provisions of Regulation 1008/2008. Apart from the Vueling case mentioned above, in January 2015 the Court issued a judgment in another case concerning Air Berlin, holding that the final price must be indicated whenever prices are shown, including when shown for the first time, and that the final price must be indicated for each flight shown and not just the flight selected by the customer.

The Court's clarifications are welcome, and should be uncontroversial. The transparency objective of the fares rules would indeed be compromised if carriers were able to specify separately taxes or charges which were not related to the actual amounts payable by them. And, as the Court said, the pricing freedom rules are intended to foster competition in air fares and not preclude the proper application of consumer protection measures, so that it would have been very surprising if the Court had held that they preclude such a measure, particularly one implementing an EU Directive on the subject.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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