Commission Decision of 17 October 2013 (1). A recent complaint brought by Ryanair to the European Commission tackled some of the most difficult issues arising in the competition law domain, such as excessive pricing and discrimination. The complaint was made under Article 102 of the Treaty on the Functioning of the European Union which prohibits firms holding a dominant position on a determined market to abuse that position. While ultimately unsuccessful, it may be a sign of things to come.
Article 102 TFEU: Discrimination
Ryanair asked the European Commission to establish, amongst other things, that the increase of airport charges by Dublin Airport Authority (DAA), including the non-differentiation between terminals, constituted an infringement of Article 102 TFEU.
Ryanair pointed out that the application of similar conditions to unequal transactions can constitute discrimination under European Union competition law (2). Ryanair alleged that this thinking applied in their case since DAA levied the same set of charges on the users of terminal one (T1) and terminal two (T2) despite the considerable differences between those two terminals.
Ryanair's complaint was that it was effectively being obliged to pay for the oversized and over-specified T2, even though Ryanair does not use its services and facilities. Ryanair claimed that it was effectively subsidising the provision of airport services and facilities of T2 to Aer Lingus (the largest user of T2) and other long-haul network airlines operating at that terminal.
In examining the claims raised by Ryanair, the Commission first noted that the users of T2 do not appear to receive any extra product/service which is not available to the users of T1. On the contrary, both terminals are in compliance with the IATA level of service C. The DAA had previously confirmed that the available services offered at the two terminals were the same, although the actual services provided to airlines at T1 differed according to their different business models (3).
Regarding the alleged discrimination behind the levying of the same airport charge regardless of which terminal is used, the Commission noted that this was not the whole story and contrasted the airport charge with passenger charges which contribute to covering the operating and capital cost of providing the basic range of facilities at the airport, including airport security, passenger screening and provision of infrastructure for hold baggage screening.
The Commission pointed out that Dublin airport had several other elements separate from the general passenger charge which changed depending on the particular airline’s usage, including:
- runway movement charges are calculated on the basis of the take-off weight which effectively means that a wide-body aircraft pays more;
- a transfer charge applies to connecting passengers as they use a narrower range of airport facilities (only those on the airside), compared to departing/arriving passengers.
Thus, the Commission noted that airlines may, to a large extent, choose which particular service or facility they require and are willing to pay for in line with the business model they apply. It concluded on that basis that there were no indications that the DAA pursued a discriminatory practice with its airport charges policy.
Article 102: Manifest Failure / Refusal to Satisfy Demand
Ryanair based another part of its complaint on how the demand of low fares airlines and their passengers has distinctive characteristics which were not being recognised by DAA’s conduct. In particular, Ryanair alleged that by introducing higher specification terminal facilities, with all the associated costs, DAA was failing to satisfy the demand of low fares airlines.
Ryanair indicated that the DAA should instead have focussed on offering airport services that corresponded to Ryanair's needs, namely the services of T1 at moderate prices. Although Ryanair did receive airport services from the DAA on an ongoing basis, it argued the DAA was abusing its dominant position by making Ryanair pay for higher quality services that did not correspond to its specific needs as a low cost airline.
Ryanair’s interpretation of the relevant case law in Höfner et Elser (4), Pavlov (5) and Ambulanz Glöckner (6) argued that the absolute unavailability of a service was not a pre-condition for the finding of abusive failure to respond to demand under case law. The Commission, however, noted that the requirement for a ?manifest' incapability to meet demand was emphasised in each of the cases cited by Ryanair.
In this light, the Commission held that the mere fact that a service is not provided at a price that is considered appropriate by a customer, does not result in an abusive and manifest incapability to satisfy demand.
The Commission came to the conclusion that there were insufficient grounds for conducting a further investigation into the alleged infringements and consequently rejected Ryanair’s complaint against DAA and Aer Lingus.
As Ryanair’s new approach to network planning embraces operating from bigger airports and shifting capacity to higher frequency services at those bigger airports (7), this complaint may simply have been taken as a test case to understand the Commission’s approach to administrators at international airports where traditional network carriers have their hubs (8).
This would explain why the complaint was brought directly to the European Commission despite, as the Commission itself noted, the practices complained of being essentially confined to Dublin airport and therefore the territory of Ireland. While its complaint was comprehensively rejected by the Commission, Ryanair and industry experts will have gained valuable insight from the Commission’s approach outlined above.