On 31 August 2012, the Belgian Competition Council issued a conditional clearance decision in a merger case involving Swissport Handling and Flightcare, two providers of cargo ground handling services.
The Competition Council distinguished between airside and landside ground handling services and held that each airport constitutes a distinct geographical market. The impact of the proposed concentration was limited to the Brussels airport. Making use of an option provided for in Directive 96/67/EC on access to the ground handling market at Community airports, Belgium has restricted the supply of airside ground handling services at the Brussels airport to two service providers. The supply of landside ground handling services is unrestricted, although at the Brussels airport this service is subject to a high level of concentration. The two markets are vertically related, with the airside ground handling services market being the upstream market for the landside market.
A specific feature in this case was that in 2011, the licences to supply airside ground handling services at the Brussels airport had been up for renewal. In June 2011, the Brussels airport operator had renewed Flightcare's licence and granted the second licence to Swissport Handling. As a result of the proposed concentration, the same entity would therefore obtain both licences. However, the decision of the Brussels airport operator was subsequently suspended. As a result, the two incumbents (Flightcare and Aviapartner) continued to supply airside ground handling services pending the outcome of the appeal procedure (which was still ongoing at the time of the Competition Council's decision). At least on a temporary basis, there was therefore no overlap between Swissport Handling and Flightcare on this market.
On the market for landside ground handling services at the Brussels airport, there was an overlap between Swissport Handling and Flightcare. However, on that market, Aviapartner would remain the market leader, with a market share between 45% and 55%. This proposed merger lead, however, to a de facto duopoly situation, with Swissport Handling/Flightcare and Aviapartner having a combined market share of more than 80%. In addition, it was noted that one of the two remaining (small) service providers was expected to acquire control over Aviapartner in the short term.
The focus of the investigation and of the Competition Council's assessment was not on the impact of the proposed concentration in each of the two service markets as such, but on the effects that would result from the creation of a player with a strong position on two interrelated markets with a (quasi) duopoly structure. The Competition Council pointed in this context to possible vertical foreclosure effects on the landside market and the possible emergence of a duopoly between two vertically integrated service providers on that market. The investigation referred in this context to possible bundling practices or price setting that would have the same effect. In addition, the Council expressed concerns about the possibility that the merged entity would obtain the two airside licences.
Swissport Handling addressed both points of criticism with a double remedy proposal. It committed not to engage in bundling practices, via price setting or otherwise, in its new contracts. In addition, it committed that the merged entity would never acquire more than one airside licence. The latter commitment effectively addressed the monopoly concern of the Competition Council. The behavioural commitment was deemed to be sufficient to address the foreclosure concern. Interestingly, its fate has been linked to a similar commitment that would apply to the other vertically integrated service provider (in the context of the potential merger control case relating to Aviapartner). The commitment would also cease to apply if the Belgian government were to decide that more than two ground handling service providers could be active on the airside. These features cast some doubts on the weight of the foreclosure concerns that had been expressed.
The Competition Council accepted the two commitments and issued a first phase clearance decision on that basis.