The General Court of the EU has ruled on the multiple actions brought by the airlines sanctioned in 2017 by the Commission for illegal cartels on the air cargo market. The General Court dismisses the appeals of eight companies, but partially annuls the Commission's decision with regard to Japan Airlines, Air Canada, British Airways, Cathay Pacific Airways, SAS Cargo group ea, Latam Airlines Group and, Lan Cargo.

The European Commission proceedings:

Following a leniency application by Lufthansa and its subsidiaries, the Commission carried out searches at various airlines and found anti-competitive exchanges between several carriers relating to components of the pricing of services provided. The carriers had introduced a fuel surcharge (hereinafter "STC") and a security surcharge (hereinafter "STS").

On 9 November 2010, the Commission concluded that 21 air carriers (including some from third countries) had coordinated prices in the period between December 1999 and February 2006 in violation of of Article 101 TFEU, Article 53 of the EEA Agreement and Article 8 of the EC-Switzerland Air Transport Agreement. The Commission imposed a total fine of approximately EUR 790 million on all the carriers involved. Lufthansa and its subsidiaries were granted full immunity from fines under the leniency procedure.

The sanctioned companies filed an action for annulment of the Commission's decision or at least for a reduction of the fines. In its judgments of 16 December 2015, the General Court of the EU annulled the decision of 9 November 2010 in whole or in part. According to the General Court, the Commission's decision was marred by a contradiction between the grounds and the means. In addition, the decision contained significant internal contradictions which were such as to prejudice the rights of defence of the companies concerned and to prevent the Court from exercising its review.

Following this annulment, the Commission adopted a new decision on 17 March 2017 targeting 19 air carriers. This Commission decision also sanctions coordination of pricing for the provision of cargo services through the STC and STS and a refusal to pay commissions. The airlines concerned lodged new appeals against this 2017 Commission decision and requested the partial or total annulment of the decision, alternatively a reduction of the amount of the fine.

The EU General Court's judgments of 30 March 2022

Confirmation of the Commission decision with respect to eight applicants

On 30 March 2022, the General Court of the EU delivered 13 judgments in this case. The Court of First Instance rejected the appeals of eight companies (Martinair Holland, Koninklijke Luchtvaart Maatschappij (KLM), Cargolux Airlines, Air France-KLM, Air France, Lufthansa and others, Singapore Airlines and Singapore Airlines Cargo) and consequently upheld the fines imposed by the Commission.

Two main pleas emerge from these actions:

  • The first plea concerns the violation of the prohibition of arbitrary action by public authorities, the principle of equal treatment and the obligation to state reasons:

The applicants had complained that the Commission had acted arbitrarily and violated the principle of equal treatment by sanctioning them for the single and continuous infringement while refraining from doing the same for the non-incriminated carriers as well as for the 47 carriers which were not addressees of the statement of objections, but which are mentioned in the grounds of the contested decision, even though these carriers also allegedly participated in the contested cartel.

The Court of First Instance explains that even if the Commission erred in not holding the other airlines liable, the airlines in question cannot invoke an illegality in favour of others to their benefit. Furthermore, the Court recalls that the Commission is under no obligation to explain why other airlines were not prosecuted.

  • The second plea concerns a failure to state reasons and a manifest error of assessment.

The applicants considered that the qualification of the refusal to pay commissions as a separate component of the single and continuous infringement of the STC and STS was a breach of the duty to state reasons and a manifest error of assessment.

In the Court's view, the Commission committed a manifest error of assessment in considering that the component of the single and continuous infringement relating to the refusal to pay commissions could be distinguished from that relating to the STC and the STS. On the other hand, the General Court considers that the partial annulment of the Commission's decision on that basis would not affect the applicant's liability for the single and continuous infringement or the gravity or duration of its infringement. Furthermore, the General Court considers that the partial annulment of the Commission's decision on the basis of this argument does not confer any benefit on the applicant such as to justify its interest in bringing proceedings.

Annulment of the decision in favour of certain airlines

In contrast, the General Court partially annulled the Commission's 2017 decision regarding Japan Airlines, Air Canada, British Airways, Cathay Pacific Airways, SAS Cargo Group and others, Latam Airlines Group and Lan Cargo.

  • Concerning the Japan Airlines case[1]: Japan Airlines operated two types of air routes. For the air routes operated by that company from third countries to the European Economic Area (EEA), the General Court recalls that, by virtue of the criteria of qualified effects, the Commission is competent to find infringements of the European competition rules in respect of conduct which was adopted outside the territory of the EEA. In this case, Japan Airlines' participation in the anti-competitive cartel constitutes a restriction by object, which implies that the Commission was not required to carry out an assessment of the competitive effects, the latter being presumed.

On the contrary, as regards intra-EEA and EU routes: the General Court considers that the Commission violated the limitation rules of Article 25 of Regulation 1/2003. Indeed, the Commission's power to impose sanctions was time-barred on 14 February 2016, i.e. at a date prior to the date of adoption of the Commission Decision of 2017. The Commission therefore wrongly held Japan Airlines liable for the single and continuous infringement in respect of intra-EEA and EU routes.

The amount of the fine imposed on Japan Airlines for the anti-competitive agreements and concerted practices on routes between airports located in countries that are Contracting Parties to the EEA Agreement but are not Member States and third countries during the period from 19 May 2005 to 14 February 2006, initially set at EUR 35.70 million, was reduced to EUR 28.875 million.

  • Regarding the Air Canada case[2]: The Court of First Instance partially annuls the Commission's decision for an error of fact. The European Commission did not provide evidence to show that Air Canada had been informed of the existence of coordination between the companies on the issue of the refusal to pay commissions. The Court therefore reduced the fine imposed on Air Canada to EUR 17.95 million instead of the EUR 21.04 million initially foreseen.
  • Concerning the British Airways case[3]: According to the Court, the Commission made an error of assessment in concluding that British Airways participated in the agreement to refuse to pay commissions. The Commission had based this conclusion on four pieces of evidence: e-mail exchanges with the airlines Qantas and Singapore Airline Cargo, with members of the Italian Board of Airline Representatives and with members of the Air Cargo Council Switzerland. The General Court stated that "there is nothing in these exchanges to establish that the airlines agreed to refuse to pay surcharges to the forwarders”. As a result, the fine initially set at EUR 104.04 million was reduced to EUR 84.46 million.
  • Concerning the Cathay Pacific Airways case[4]: The General Court considers that the Commission's power to impose penalties in respect of the infringing conduct relating to the intra-EEA and Union-Switzerland routes was time-barred as from 9 November 2015, that is to say, before the date of adoption of Decision C(2017) 1742 final of 17 March 2017. The General Court concluded that the Commission infringed the limitation rules in respect of the single and continuous infringement in relation to the intra-EEA and Union-Switzerland links. The General Court annuls in part the Commission's decision as regards the coordination of the airlines' conduct with regard to the STC and STS and the payment of a surcharge for intra-EEA and Union-Switzerland routes for the period from 4 January 2000 to 14 February 2006.

The amount of the fine initially set at EUR 57.12 million is reduced to EUR 47.14 million.

  • With regard to the Latam Airlines Group case[5]: According to the General Court, Latam Airlines was aware of the existence of bilateral contacts aimed at reducing uncertainty between carriers about their respective policies on the refusal of commission payments. However, this knowledge of bilateral exchanges does not establish that Latam Airlines Group was aware of a wider coordination between airlines on the issue of the refusal to pay commissions.

The Commission relied on five e-mails sent by Lufthansa to several airlines, including Latam Airlines, in which Lufthansa announced increases in the STC. The General Court found that these emails were not sufficient to establish Latam Airlines Group's participation in the anti-competitive cartel concerning the STC.

The General Court annuls the parts of the Commission's decision concerning the imputation of the infringement concerning the refusal to pay commissions and relating to the security surcharge. Moreover, in view of the rules on limitation periods, the Commission used its power of sanction when it was time-barred. Consequently, the General Court holds that the European Commission infringed the rules on limitation periods for the single and continuous infringement in respect of intra-EEA, EEA except EU-Third countries and EU-Switzerland routes.

Consequently, the Court of First Instance reduces Latam Airlines Group Lan Cargo's fine from EUR 8.22 million to EUR 2.24 million.

  • As regards the SAS Cargo Group In its Decision, the Commission considered that SAS Cargo Group was directly involved in only two of the three components of the single and continuous infringement, namely the STS and the STC. However, the Commission considered that SAS Cargo Group could also be held responsible for the infringement concerning the refusal to pay surcharges.

The Commission considered that, because of the identity of purpose with the infringements concerning the STS and the STC, SAS Cargo Group and others had knowledge of the anti-competitive coordination of the airlines with regard to the refusal to pay commissions. However, this presumption does not constitute serious, precise and concordant evidence to demonstrate the participation of SAS Cargo Group in the infringement concerning the refusal to pay commissions. Consequently, the part of the Commission's decision concerning SAS Cargo Groupe's liability for the refusal to pay commissions is annulled by the Court.

Moreover, the General Court annulled the part of the Commission's decision concerning the determination of the infringement regarding the fuel surcharge for flights from Thailand to the EU for the period between 20 July 2005 and 14 February 2006. The General Court did not reduce the amount of the fine for SAS Cargo Group.

Conclusion

With these judgements of 30 March 2022, the General Court puts an end to a long-running dispute between the airlines and the European Commission dating back to the leniency procedure started in 2005, subject to an ultimate appeal before the General Court of the EU.

On that occasion, the General Court provides useful clarifications as regards the competence of the European Commission for anti-competitive behaviour that took place outside the EEA territory.

In addition, the statute of limitations concerning the Commission's power to impose sanctions for anti-competitive behaviour is specified.

Finally, the General Court has clarified the level of admissible evidence that the Commission may use to determine the existence of an infringement of the EU competition rules.