On 17 April 2019, the European Parliament and the Council approved the new Regulation (EU) 2019/712 on safeguarding competition in air transport, repealing Regulation (EC) No 868/2004 (which proved to be ineffective and was never substantially been put into practice).
The new Regulation was published in the Official Journal of the European Union on 10 May 2019 and came into force on 31 May 2019.
The need to adopt the new Regulation arises from the consideration that, in spite of continued efforts by the Union and some third countries, principles of fair competition in the context of air transport services had not yet been defined through specific multilateral rules (in particular, in the context of the ICAO 15 or of World Trade Organization (WTO) agreements) 16. Air transport services have indeed been largely excluded from the scope of the General Agreement on Trade in Services (GATS).
The European legislator has therefore wanted to fill such gap by adopting a dissuasive instrument aimed, on the one hand, at maintaining favorable conditions conducive to a high level of Union connectivity and, on the other, at ensuring fair competition with third-country air carriers.
In order to achieve both the above purposes, the Commission is under the Regulation entrusted with certain specific investigation powers, exercisable in the context of a proper investigation procedure, at the end of which the Commission will be able to impose ad hoc "redressive measures" to fight any practice distorting competition 17 causing, or threatening to cause, injury to Union air carriers. More specifically, the Commission shall inter alia be entitled to:
a) initiate an investigation following a written complaint submitted by a Member State, one or more Union air carriers or an association of Union air carriers, or on the Commission's own initiative, if there is a prima facie evidence of the existence of (i) a practice distorting competition, adopted by a third country or a third-country entity, (ii) injury or threat of injury to one or more Union air carriers; and (iii) a causal link between the alleged practice and the alleged injury or threat of injury;
b) seek all the information it may deem useful to conduct the investigation. Furthermore, if it appears necessary, the Commission may carry out investigations in the territory of a third country, provided that the third-country entity concerned has given its consent and the government of the third country has been officially notified and has not raised any objection;
c) share its own information with Member States, third countries, third-country air carriers, complainants and all the parties concerned (except for internal documents and confidential information);
d) adopt ad hoc "redressive measures", including (i) financial duties (i.e., application of fines) or (ii) any operational measure of equivalent or lesser value, such as the suspension of concessions, of services owed or of other rights of the third-country air carrier, which shall remain in force only as long as, and to the extent that, it is necessary in view of the persistence of the practice distorting competition and the ensuing injury.
Besides the investigation process and the so-called "redressive measures", which are certainly of significant impact, the Regulation seeks to clarify what elements – considered symptomatic – can be taken into account to demonstrate the existence of unfair competition.
In this sense, the Regulation provides that competitive "discrimination" includes situations where a Union air carrier is subject to different treatment without objective justification, for example concerning access to ground handling services and the relevant prices, airport infrastructure, air navigation services, the allocation of slots, administrative procedures (such as those for the allocation of visas for foreign carriers' staff), detailed arrangement for the selling and distribution of air services, or any other unfair practice of operational nature.
In this regard, a finding of injury shall be based on further relevant aspects, namely, the situation of the Union air carriers concerned (notably in terms of aspects such as frequency of services, utilization of capacity, network effect, sales, market share, profits, return on capital, investment and employment) as well as the general situation on the affected air transport services markets (notably in terms of level of fares or rates, capacity and frequency of air transport services or use of the network).
In a context of increased competition at a global level, the European Union now has a more effective instrument to tackle any unfair commercial practices in the air transport sector by companies located in third countries. The power conferred upon the Commission to investigate and take financial or operational redressive measures when an airline from a third country engages in market-distorting practices that have caused (or clearly threaten to cause) injury to a Union air carrier is a powerful and potentially very dissuasive tool. In order to evaluate the effects, reactions and scope of the new Regulation, it will however be necessary to wait for the results of the first investigations conducted by the European Commission.
Probably, in certain specific situations, the reaction to distortive practices will have to be very carefully calibrated: suffice it to think, for example, of the state subsidies that are regularly provided to flag and non-flag air carriers in certain third countries.
What is certain, however, is that the objective of countering the risk that unfair practices may hinder the connectivity and competition of the European Union and, in the long term, cause situations of dominance, or even monopoly, to arise in the aviation market can now be pursued with greater force and effectiveness than ever before.
15 The International Civil Aviation Organization (ICAO) is a UN specialised agency primarily concerned with the regulation and development of civil aviation. As its primary objective, ICAO fosters the planning and development of international rules and conventions on air navigation, transport of passengers and cargo, air transportation safety.
16 More specifically, in the Recitals of the Regulation under examination, it is acknowledged that "Aviation plays a crucial role in the Union's economy and in the everyday lives of Union citizens, and is one of the best performing and most dynamic sectors of the Union economy: It is a strong driver for economic growth, jobs, trade and tourism, as well as connectivity and mobility for businesses and citizens alike, particularly within the Union aviation internal market. ... In a context of increased competition between air transport actors at a global level, fair competition is an indispensable general principle in the operation of international air transport services".
17 For example, abuse of a dominant position on international routes operated under a monopoly, which may lead to excessively high fares, or the systematic cancellation of flights at certain times, which restricts the range of services offered and makes it more difficult for competitors to enter the market to the detriment of consumers.
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