EU looks into possible Skyteam Atlantic monopolies

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The Air France-KLM/Delta/Alitalia Transatlantic co-operation to be checked by European Commission on possible monopoly behaviour:

European Commission - Press release

Antitrust: Commission opens a probe into transatlantic joint venture between Air France-KLM, Alitalia and Delta and closes proceedings against eight members of SkyTeam airline alliance.

Brussels, 27 January 2012 - The European Commission has opened an investigation to assess whether a transatlantic joint venture between Air France-KLM, Alitalia and Delta, all members of the SkyTeam airline alliance, breaches EU antitrust rules. The goal is to ensure that this tie-up does not harm passengers on EU-U.S. routes. An opening of proceedings means that the Commission will deal with the case as a matter of priority, it does not prejudge the outcome. Simultaneously, the Commission has closed formal antitrust proceedings in relation to cooperation agreements between eight members of SkyTeam: Aeromexico, Air France, Alitalia, Continental Airlines, Czech Airlines, Delta, KLM and Korean Air Lines.

In 2009 and 2010, several members of the SkyTeam airline alliance - Air France-KLM, Alitalia and Delta - signed agreements establishing a transatlantic joint venture focusing on the routes between Europe and North America. Pursuant to these agreements, the parties fully coordinate their transatlantic operations with respect to capacity, schedules, pricing and revenue management. The parties also share profits and losses of their transatlantic flights.

This partnership represents the deepest form of cooperation within SkyTeam and aims at the alignment of the parties' commercial incentives. The Commission will investigate whether the partnership may harm passengers on certain EU-U.S. routes where, in the absence of the joint venture, the parties would be providing competing services. This could be in breach of Article 101 of the Treaty on the Functioning of the EU (TFEU) that prohibits anticompetitive agreements. The new investigation is coherent with the Commission's recent enforcement action in relation to the transatlantic joint ventures of the two other airline alliances, Oneworld (see IP/10/936) and Star (see MEMO/09/168).

At the same time the Commission has decided to close its initial investigation against the eight SkyTeam members. This decision was taken as part of the priority-setting process in light of significant changes in the circumstances on the relevant markets. The closure of proceedings does not however relieve the SkyTeam members from assessing their behaviour and ensuring that they comply with EU competition law.

Background
SkyTeam is one of the three world-wide airline alliances. Under its umbrella the member airlines enter into various cooperation agreements in relation to passenger and cargo air transport. The scope and intensity of such cooperation vary between alliance members; so does the effect on competition.

The Commission's initial investigation concerned the entirety of the SkyTeam cooperation, i.e. agreements between all members in all geographic areas. In 2006, the Commission sent a statement of objections to Aeromexico, Air France, Alitalia, Continental Airlines, Czech Airlines, Delta, KLM and Korean Air Lines, expressing concerns that the cooperation between these SkyTeam members was likely to restrict competition on some routes (see MEMO/06/243). In 2007, the parties proposed commitments to allay the competition concerns. However, the results of the market test did not allow the adoption of the proposed commitments, in particular on the EU-U.S. routes.

Article 101 of the TFEU prohibits agreements and concerted practices which may affect trade and prevent or restrict competition. The implementation of this provision is defined in the Antitrust Regulation (Council Regulation No 1/2003) which can be applied by the Commission and by the national competition authorities of EU Member States.

The legal base for the Commission's opening of formal proceedings is Article 11(6) of the Antitrust Regulation.

Article 11(6) of the Antitrust Regulation provides that the initiation of proceedings by the Commission relieves the competition authorities of the Member States of their competence to also apply EU competition rules to the practices concerned. Article 16(1) further provides that national courts must avoid giving decisions, which would conflict with a decision contemplated by the Commission in proceedings that it has initiated.

The Commission has informed the companies and the competition authorities of the Member States that it has opened proceedings in the new case.

The duration of an antitrust investigation depends on a number of factors, including the complexity of the case, the extent to which the undertakings concerned cooperate with the Commission and the exercise of the rights of defence.

Contacts :
Antoine Colombani
Marisa Gonzalez Iglesias