International Airline Alliances: EC Competition Law / US Antitrust Law and International Air Transport

Transcription

1 International Airline Alliances: EC Competition Law / US Antitrust Law and International Air Transport Angela Cheng-Jui Lu KLUWER LAW INTERNATIONAL THE HAOUE / LONDON / NEW YORK

2 Table of contents Table of Contents Dedication About thè Author Table of Contents Preface Acknowledgement Abbreviation Fo reword V vii ix xxiii XXV xxvii xxix Introduction 1 Chapter 1: Relevant Background to International Airline Alliances 9 1. Hi storica! Background Establishment of thè Doctrine of Sovereignty over Airspace Paris Convention Sovereignty and Exchange of Air Operating and Traffic Rights Chicago Conference Chicago Convention Bilateral Air Service Agreements Substantial Ownership and Effective Control Clause Prohibition of Cabotage New Developments, Questions and Problems 23

3 Table of Contents 2. Economie Background Deregulation in thè United States Libera]isation in thè European Union Three Liberalisation Packages Relationship between thè European Community and Third Countries General Open Skies Agreements Reactions to thè ECJ Judgment Comments on thè ECJ Judgments on Open Skies Agreements Modern Trends Liberai Bilateral and Open Skies Agreements Consolidation, Globalisation and Concentration Difficulties of Mergers and Equity Sharing between Airlines of Different Nationalities Difficulties in Exchanging Traffic Rights on a Multilateral Basis Forming Alliances to Meet Competition and Consumer's Preferences Airline Alliances Different Models of International Airline Alliances and Their Growth Benefits of International Airline Alliances for Airlines Benefits of International Airline Alliances for Consumers Disadvantages of International Airline Alliances: Anti-Competitive Practices 67

4 Table of contents 4.5. Antitrust Immunity for International Airline Alliances Comments on International Airline Alliances Application of Competition/Antitrust Law to thè International Air Transport Sector Inevitability of Application of Competition/Antitrust Law Special Attenti on Required in International Air Transport Escalation of Conflicts and Differences in Applications of Competition/Antitrust Law to International Economie Activities Effects of Applying Competition/Antitrust Law to International Economie Activities 73 Concluding Remarks 74 Chapter 2: Overview of European Community Competition Law and Its Applications to Transatlantic Airline Alliances Basic Background to EC Competition Law Brief Introduction to thè European Union The European Community and Its Legai Institutions The Legai Instruments Sources of EC Competition Law Relationship between thè European Community and Member States regarding Competition Law EC Competition Law and thè Air Transport Sector Substanti ve EC Competition Law Artide 81 of thè EC Treaty 89 XI

5 Table of Contents The Prohibition of Artide 81(1) The Legai Effects of An Infringement of Artide 81(1) Group and Individuai Exemptions under Artide 81(3) Artide 82 of thè EC Treaty General Concepts Relevant Market Existence of Dominant Position Abuse of Dominant Position Application of Artide 82 in thè Air Transport Sector Interface of Articles 81 and The Implementation of EC Competition Law General Implementation: Council Regulation No. 17/ Special Exemptions in Air Transport Sector 104 (A) Council Regulation No. 141/ (B) Case: Nouvelle Frontière 106 (C) Council Regulation No. 3975/ (D) Council Regulation No. 3976/ (E) Case: Ahmed Saeed 110 (F) Commission Proposai for Amending Council Regulation Nos. 3075/ Merger Contrai and Joint Venture Background to thè European Community Merger Regulations ("ECMR") The Relationship between thè ECMR and Articles 81 & The ECMR and Air Transport 115

6 Table of contents An Overview of thè ECMR Basic Elements of thè ECMR Notification and Procedure Applications of thè ECMR in thè Air Transport Sector The Applications of EC Competition Law to Economie Activities with Foreign Elements Involved Applications under Articles 81 and 82 of thè EC Treaty Before thè WoodPulp Case The Wood Pulp Case Other Relevant Developments Applications of thè ECMR EC Competition Policy Overview International Co-operation and thè Commission's Mandate The Limited Scope of 1991 and 1998 Agreements EC Competition Policy in thè Air Transport Sector Applications of EC Competition Law to International Airline Alliances Commission Decisions on LH/SAS, LH/SAS/BMI and LH/OS Airline Alliances LH/SAS Alliance LH/SAS/BMI Alliance LH/OS Alliance AF/AZ Alliance Commission Notices on Transatlantic Airline Alliances KLM/Northwest ("Wings") Alliance 138 Xlll

7 Table of Contents LH/United/SAS ("Star") Alliance BA/AA ("Oneworld") Alliance Air France/Delta ("SkyTeam") Alliance Comments on thè Commission Notices on thè KLM/NW, LH/United/SAS and BA/AA Alliances 145 Concluding Remarks 148 Chapter 3: Overview of US Antitrust Law Governing International Air Transport and Its Applications to Transatlantic Airline Alliances Overview of Substantive US Antitrust Laws Basic Economics of US Antitrust Laws Substantive US Antitrust Laws The ShermanAct Section 1 of thè Sherman Act Section 2 of thè Sherman Act Relationship between thè Sherman Act and Oligopoly Major Differences between Section 1 and Section 2 of thè Sherman Act The Clayton Act - Mergers and Acquisitions Enforcement of US Antitrust Laws and Related Legai Departments Applications of US Antitrust Laws to Economie Activities with Foreign Elements Involved Judicial Interpretations: From American Banana to Laker Ainvays 172 xiv

8 Table of contents 2.2. Legislative Contribution: Direct, Substantial, and Foreseeable Effect Doctrine Academic Contribution: Reasonableness A Step Backward: Hartford Fire Insurance Executive Contribution: Antitrust Enforcement Guidelines for International Operations Overview Defences against US Application US International Antitrust Policy US Antitrust Laws and International Air Transportation Special Provisions for International Air Transportation Antitrust Immunity and Public Interest Test The United States Code Procedural Rules Specific Regulatory Department US Policy in International Air Transportation DOT Decisions on Transatlantic Alliance Agreements Open Skies Agreements Required Public Interest Test Merger Guidelines Invoked Definition of Relevant Market and thè Carving-Out of Immunity Need for Competitive Remedies Requirement of Withdrawal from Ali IATA Tariff Co-ordination Activities Computer Reservation System Issues 211 xv

9 Table of Contents 6.8. Separate Issues 212 Concluding Remarks 213 Chapter 4: Comparison of Applications of EC Competition Law and US Antitrust Law to International Air Transport Introduction Similarities and Differences in General Similarities Substance Implementation of Competition Law to thè International Air Transport Sector Differences Genesis of Competition Law Authorities Different Procedures for Granting Approvai of Antitrust Immunity or Exemption Airline Alliances and Code-Sharing Agreements Introduction to Airline Alliance Agreements Introduction to Code-Sharing Agreement Comparison of Procedures Differences in Laws Overview of thè Tariff Consultation Agreement Background to thè International Air Transport Association and Its Tariff Co-ordination Process 231 xvi

10 Table of contents Rationale for Tariff Co-ordination Process Anti-Competitive Risks of Tariff Co-ordination Agreements Comparison of thè of EC Competition Laws and US Antitrust Laws Applicable to thè Tariff Co-ordination/Consultation Agreement Differences in Interpretati ons and Applications of Laws Defining thè Relevant Market Market Power and Dominant Position Approaches to thè Application of Competition/Antitrust Law to International Economie Activities Comparison of thè EC and US Authorities' Reviews of Transatlantic Airline Alliances Divergent Evaluations of Market Concentration Concept of Anti-Competitive Practices Different Remedies Differences in Merger Control and Alliances (Joint Venture) Differences in Applications of Laws to Alliances Applications of Merger Regulations: Similar Rules but Contradictory Decisions Clashes in Individuai Cases Differences in Policies EC Competition Policy with Regard to International Air Transport From thè Judicial Point of View From thè Executive Point of View From Case Studies US Antitrust Policy with Regard to International Air Transport 265 xvi i

11 Table of Contents Application of US Antitrust Law to International Economie Activities From thè Perspective of Deregulation Exporting "Open Skies" DOT's Approvai of Antitrust Immunity for alliance Agreements Approvai of thè Merger between Boeing and McDonnell Douglas Analysis of US Antitrust and International Air Transport Policy 269 Concluding Remarks 270 Chapter 5: The Current International Competition Regulations regarding International Air Transport Introduction Multilateral Approach A Unified International Competition Law Havana Charter United Nations Conference on Trade and Development Code Munich Proposai- Draft International Antitrust Code Review of Multilateral Approaches Special Concerns in International Air Transport Special Proposai for Applying Competìtìon/Antitrust Law to International Air Transport International Civil Aviation Organisation ("ICAO") Roleof thè ICAO 282 XVI li

12 Table of contents Contributions of thè ICAO Review of thè ICAO's Contributions World Trade Organisation ("WTO") GATT/GATS Mechanism Different Considerations regarding Applying GATS to International Air Transport Trade and Competition Policy under thè WTO Limits of GATS with regard to Trade in Services in International Air Transport Other International Organisations Regionalism Supranational Approach Transatlantic Common Aviation Area Doctrine of Comity and Co-operation between Governments Bilateral and Cooperative Approach US and EC Comity Agreements Review of US and EC Comity Agreements Organisation on Economie Co-operation and Development Recommendations Benefits of Comity Doctrine and Co-operation Limits of Comity Doctrine and Co-operation Synthesis Convergence of Competition Policies OECD: Global Forum on Competition US: Global Competition Initiative 318 xix

13 Table of Contents 7.3. EC: Global Competition Forum Review of thè GCF, GCI and ICN 527 Concluding Remarks 527 Chapter 6: Conclusion and Recommendations Introduction Brief Review of thè Essential Elements for Fair and Free Competition in thè International Air Transport Market Elements in Aviation Law Elements in Application of Competition Law to International Air Transport Recommendations An International Air Transport Market with Free Competition Multilateral Approaches to Exchanging Traffic Rights Eliminating thè Limitations on Ownership/Control and Cabotage Rules for Reducing thè Conflicts over thè Applications of Competition Laws to International Economie Activities Safeguarding Public Interests via thè Application of Competition Law Harmonising Approaches to Applying Competition Laws to International Economie Activities Harmonisation in Procedures and Institutions Unified Criteria for Granting Immunity/Exemption 333 xx

14 Table of contents Harmonisation of Divergent Evaluations of Market Access Harmonising thè Concept of Anti-Competitive Practices Providing Reliable Remedies Convergence of Competition Policies Supplements to Present Solutions Bilateral Agreements Expanding Application and Strengthening Binding Force Suggestions on Harmonising Substantive Laws Unified Procedural Rules Forum for Convergence of Competition Policies Transatlantic Common Aviation Area Assistance from International Organisations 345 Concluding Remarks 346 Bibliography 349 Subject Index 407 xxi