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Aviation law: How good is the new EU "Regulation on safeguarding competition in air transport"?

Since 2019, the "Regulation 2019/712 on safeguarding competition in air transport" has been in place, which aims to prevent competitive disadvantages for European airlines. It is intended to enable the European Commission to take measures against unfair and discriminatory practices of non-Union airlines - among other things on the basis of a complaint by airlines or an association. This is because domestic airlines are often exposed to state-subsidised competitors or other unfair practices in global competition and suffer a corresponding competitive disadvantage. National or European competition rules often do not apply in such cases.

What can an airline do against unfair or discriminatory practices?

One or more EU airlines or an association of EU airlines - in addition to individual member states - has the right to lodge a complaint with the EU Commission. The EU Commission is obliged to initiate an investigation procedure if there is prima facie evidence of the following circumstances:

- A distortive practice by a third country or a third country entity (which is, in simplified terms, any natural or legal person in a third country involved in the provision of air transport and related services, such as airlines, ground handlers, etc.) – these are cases of "discrimination" or subsidies;

- injury or threat of injury to one or more EU airlines; and

- a causal link between the alleged practice and the alleged (threatened) injury.

In principle, the Commission has a maximum of five months after a complaint has been lodged to decide whether to initiate proceedings.

Discrimination is any differentiation by a third country or third country entity, not justified by objective reasons, in relation to the provision of goods or services (including public services) used for the operation of air transport services or in relation to their treatment by public authorities relevant to those services. This includes practices relating to air traffic control or airport facilities and services, fuelling, ground handling, security, computer reservation systems, slot allocation, charges and the use of other facilities or services for the provision of air transport services. Mostly, it will involve the application of different prices.

In turn, a subsidy is a financial contribution or income or price support provided by a government or other public body of a third country.

Investigation by the EU Commission

Following the initiation of the investigation procedure, the Commission shall seek and verify all information it deems necessary for the purpose of the investigation. For the purpose of a determination of injury, all relevant factors shall be taken into account, in particular:

- The situation of the EU carriers concerned, in particular in terms of service frequency, capacity utilisation, network effects, turnover, market share, profit, profitability, investment and employment; and

- the general situation in the markets for the air services concerned, in particular with regard to price levels, capacity and frequency of air services or network utilisation.

If the investigation is positive and there are no grounds for suspension or termination, remedies against the distortive practice are available (so-called "injury track"). Alternatively, if there is a violation of obligations under international air service agreements or other agreements containing provisions on air services, the proceedings may be suspended and the violation dealt with under the dispute settlement mechanism provided for in such an agreement (so-called "violation track").

Remedies are designed to remove the injury resulting from a practice that distorts competition. They are imposed on the airlines of a third country benefiting from this practice. The Commission may impose financial charges or operational measures to this end. The Commission must also always take into account the Union interest when making its decision - for example, if the other conditions for the imposition of remedies are met, but such imposition would be against the Union interest, the Commission must terminate the investigation without remedial action.

The adoption, maintenance, amendment or repeal of remedies are decided through the so-called comitology by examination procedure – here the EU member states have a significant say. The Commission is thus dependent on them, and the effectiveness of the regulation must first pass its practical test.

Attorney aviation law & competition law

Dr. Simon Harald Baier LL.M. advises on all questions of aviation law and competition law.

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