Notice of Intention to Accept Binding Commitments Offered by International Consolidated Airlines Group S.A
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Notice of intention to accept binding commitments offered by International Consolidated Airlines Group S.A. and American Airlines Inc, in relation to the Atlantic Joint Business Agreement Case number 50616 7 May 2020 © Crown copyright 2020 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government- licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. Contents Page 1. Introduction ........................................................................................................... 2 2. The CMA’s investigation ....................................................................................... 5 3. Background ......................................................................................................... 10 4. The CMA’s competition concerns ....................................................................... 15 5. The commitments ............................................................................................... 28 6. The CMA’s assessment of the Proposed Commitments ..................................... 31 7. The CMA’s intentions and invitation to comment ................................................ 42 Annex 1: The proposed commitments ...................................................................... 44 1 1. Introduction 1.1 In October 2018, the Competition and Markets Authority (the ‘CMA’) opened an investigation under the Competition Act 1998 (the ‘Act’) into an agreement between American Airlines Group Inc (‘AA’);1 members of International Consolidated Airlines Group S.A. (‘IAG’),2 British Airways plc (‘BA’),3 Iberia Líneas Aéreas de España SA (‘IB'),4 and Aer Lingus Limited (‘EI’);5 and Finnair OYJ (‘AY’)6 (the ‘Parties’).7 The CMA’s investigation has considered whether the revenue-sharing joint venture (‘JV’) agreement, known as the Atlantic Joint Business Agreement (the ‘AJBA’), between the Parties covering air transport services between Europe and North America (the Atlantic Joint Business or ‘AJB’) amounts to an infringement of the Chapter I prohibition of the Act and/or Article 101(1) of the Treaty on the Functioning of the European Union (the ‘TFEU’). The Parties have offered commitments to bring the investigation to an end. Any decision by the CMA accepting binding commitments will not include any statement as to whether the conduct of any of the Parties has infringed the Act or the TFEU either prior to the acceptance of the commitments or once the commitments are in place. 1.2 In May 2020, AA and IAG (the ‘Commitments Parties’) offered commitments aimed at addressing the CMA’s competition concerns in this investigation (the ‘Proposed Commitments’). 1.3 The CMA hereby gives notice8 that it proposes to accept the Proposed Commitments and invites representations from interested third parties on this proposed course of action. Formal acceptance of the Proposed Commitments by the CMA would result in the termination of its investigation, with no decision made on whether or not the Chapter I prohibition of the Act or Article 101(1) of the TFEU has been infringed by the Parties. The text of the Proposed Commitments offered is set out at Annex 1 to this document. 1.4 The CMA is mindful of the impact of the Coronavirus (COVID-19) (‘COVID- 19’) pandemic on the aviation sector, which potentially affects both the ability of third parties to engage with the CMA’s consultation and whether the Proposed Commitments will address the competition concerns arising from 1 A company incorporated in the state of Delaware, United States, under registration number 0931981. 2 A company incorporated in Spain under registration number M-492129. 3 A company incorporated in England and Wales under registration number 01777777. 4 A company incorporated in Spain under registration number M-491912. 5 A company incorporated in Ireland under registration number 211168. 6 A company incorporated in Finland under registration number 0108023-3. 7 EI is not yet participating in the Atlantic Joint Business pending approval by the US Department of Transportation, but, as a signatory since October 2017, is a party to the Atlantic Joint Business Agreement. 8 Pursuant to paragraph 2 of Schedule 6A of the Act. 2 the AJBA in the longer term. In the light of the current exceptional circumstances, the CMA has therefore discussed the appropriate next steps in its investigation with the Parties, third party airlines, and other interested third parties. Given the upcoming expiry of commitments previously accepted by the European Commission (the ‘Commission’) in respect of the AJBA,9 and the need for airlines to have certainty about the availability of take-off and landing slots following the expiry of those commitments, the CMA has decided to proceed with issuing this Notice. 1.5 The CMA recognises that, as a result of the current challenges related to COVID-19, there is some uncertainty about competition on routes covered by the AJBA and a risk that the Proposed Commitments may not address the CMA’s competition concerns in the future. The CMA notes, however, that acceptance of the Proposed Commitments would not prevent the CMA from taking any action in relation to competition concerns which are not addressed by the Proposed Commitments.10 1.6 Moreover, the Commitments Parties have agreed that due to the exceptional circumstances resulting from the COVID-19 crisis the CMA may, of its own initiative, review the Proposed Commitments at a point between two and five years after the commitments come into effect. Furthermore, acceptance of the Proposed Commitments would not prevent the CMA from continuing the investigation in the future, making an infringement decision, or giving a direction in circumstances where the CMA had reasonable grounds for: a. believing that there had been a material change of circumstances since the commitments were accepted; b. suspecting that a person had failed to adhere to one or more of the terms of the commitments; or c. suspecting that information which led the CMA to accept the commitments was incomplete, false or misleading in a material particular.11 1.7 The CMA invites interested third parties to make representations on the Proposed Commitments, which it will take into account before making its final decision on whether to accept the Proposed Commitments. In order to assist third parties in responding to this consultation, this Notice provides information on the CMA’s investigation, the Parties, the relevant market context and the CMA’s competition concerns. The document then summarises the Proposed Commitments offered by the Commitments Parties and sets out why the CMA 9 See 2.2 - 2.3 below. 10 Section 31B(3) of the Act. 11 Section 31B(4) of the Act. 3 provisionally considers that the Proposed Commitments address its competition concerns. Details on how to comment are provided at the end of this document. The closing date for comment is 4 June 2020. As noted above, the CMA is mindful of the impact of the COVID-19 pandemic on the aviation sector, and given the current exceptional circumstances, is allowing an extended period for comments from interested third parties. Where justified, the CMA will also consider any reasonable requests for additional time to comment. 1.8 Certain confidential information in this document is presented in a range format, denoted in square brackets. 4 2. The CMA’s investigation The investigation 2.1 On 11 October 2018, the CMA launched a formal investigation under section 25 of the Act into the AJBA, having considered the CMA’s Prioritisation Principles.12 2.2 The Commission conducted an investigation into the AJB between 2009- 2010, which was closed when the Commission accepted commitments from the undertakings who were then parties to the AJBA (at that time, AA, BA and IB) to address potential competition concerns in relation to six routes: London- Dallas, London-Boston, London-Miami, London-Chicago, London-New York and Madrid-Miami (the ‘2010 Commitments’).13 2.3 On expiry of the 2010 Commitments, in July 2020, the Commission may have re-assessed the AJBA. However, as five of the six routes subject to the 2010 Commitments are between the UK and the US, and to prepare for a time when the Commission would no longer have responsibility for competition in the UK after the end of the EU Exit transition period (the ‘Transition Period’), the CMA decided to review the competitive impact of the AJB in anticipation of the expiry of the 2010 Commitments.14 2.4 After launching the investigation, the CMA initially considered the competitive impact of the AJB on all seven US-UK city-pair routes where BA’s and AA’s non-stop services overlap. These were: London-Boston, London-Chicago, London-Dallas, London-Los Angeles, London-Miami, London-New York and London-Philadelphia. 2.5 Having completed an initial review of these seven city-pair routes, the CMA decided not to prioritise further investigation of the London-Los Angeles and London-New York city pair routes, given the competitive constraints faced by the AJB on those routes. In particular, the CMA noted that there were at least 12 ‘CMA Prioritisation Principles’ (CMA16), 1 April 2014. 13 Case COMP/F-1/39.596 – BA/AA/IB, Decision of the Commission dated 14 July 2010. 14 The UK exited the EU on 31 January 2020 subject to the European Union (Withdrawal) Act 2018 (the ‘Withdrawal Act’). The