Non-EU air carriers and/or countries could be investigated by the European Commission (EC) under a new EU Regulation aimed at safeguarding competition in air transport1 (the Regulation). The EC will be able to investigate where it suspects that non-EU air carriers or countries have engaged in practices which stand to injure EU air carriers.
Focus of the Regulation
In effect, the Regulation seeks to provide a mechanism for the EC to extend the EU anti-subsidy (State aid) rules, which prevent EU air carriers from benefiting from market-distorting state support, to non-EU air carriers and countries. While an existing regulation2, in force since 2004, currently seeks to protect EU air carriers against subsidisation and unfair pricing practices from non-EU air carriers, it has proved to be ineffective, with no official complaints ever made or investigations undertaken.
The new Regulation also applies to discrimination against an EU air carrier providing air services into non-EU countries (for example, the terms of access to ground handling services or the allocation of slots). However, the Regulation acknowledges the EC can only carry out investigations in the territory of a relevant third country with consent, so it may be difficult in practice for the EC to investigate such support or behaviour.
As mentioned, the Regulation's central focus is on injury to EU air carriers from discrimination or subsidies to non-EU air carriers, rather than on the effects on competition across a market; although the EC is also required to have regard to the "Union interest", which includes the protection of consumer interests and maintaining a high level of connectivity for passengers and for the EU. While this aspect will require economic analysis by the EC, it is less certain that the assessment of injury to an EU air carrier will involve a rigorous economic analysis.
Timetable for investigation
An investigation can be opened on the basis of a complaint from a member state, EU air carrier or association of air carriers, or on the EC's own initiative. To open an investigation, complainants have to demonstrate prima facie evidence of: (i) a practice distorting competition; (ii) injury or threat of injury; and (iii) a causal link between the two. If the EC does not consider that this threshold is met, the complainant has 45 days to provide additional evidence. The Commission has 12 months to complete its investigation of a complaint, although this can be extended. If the Commission then decides to issue proceedings, the entire proceedings have to be concluded within 20 months, which again can be prolonged in "duly justified cases".
If the EC determines that there is a practice that distorts competition which causes injury to the EU air carriers concerned, it can seek remedies. These include: (i) financial duties; or (ii) any operational measure of equivalent or lesser value. While it cannot consist of the suspension or limitation of traffic rights, the concept of "other operational measures" is broad, including, for example, the suspension of concessions. Any remedies cannot enter into force until a threat of injury has developed into actual injury.
With the Regulation coming into force in May 2019, it will be interesting to see how the EC administers the Regulation in practice, not least how it investigates non-EU air carriers and countries. It also remains to be seen how rigorous the assessment of "injury" will be and to what extent an economic analysis of Union interest will feature in cases. Any proceedings opened under the new Regulation will be watched with interest.