The European Commission plans to launch a major crackdown on anti-competitive practices in the EU. The move represents a tacit admission that four years of liberalisation have failed to remove a number of barriers to entry in the European market.
KLM may be the first to feel the effect of the hardened stance; Commission officials have indicated they will push for the toughest penalties if the Dutch carrier is found guilty of predatory practice against Luton-based EasyJet.
Though there are no plans for additional legislation, officials believe the KLM case may serve as a watershed in proving its effectiveness as a competition watchdog. 'Depending on the outcome we feel that [the verdict and penalty] could serve as a type of deterrent,' says one senior official.
Though a final ruling is not expected until the end of October, the Commission has made strong signals that it believes KLM is guilty following hearings in late September. EasyJet alleged KLM was seeking to drive it out of the London-Amsterdam market by introducing an uneconomic fare structure. KLM could be fined up to 10 per cent of its annual revenue in that market.
The Commission will appoint consultants to re-examine the regulatory and competitive framework, particularly for small- and medium-sized carriers. The study will cover established areas of dispute like frequent flyer programmes and codesharing as well as corporate discounts, travel agency overrides, access to funding and crossborder payment regimes.
The study was inspired by a 1996 report by the UK CAA which identified 31 key routes on which competition had failed to emerge since the third package of liberalisation came into effect in 1993. Though six of those routes now have three or more carriers, the CAA and Brussels believe other factors are discouraging new entrants.
The study will be commissioned before the end of October with a preliminary report due in January. The Commission says it has noted an upsurge in complaints of anticompetitive behaviour. The impact of FFPs and marketing techniques are likely to come under scrutiny along with pricing practices over the coming months.
Hearings are scheduled on Virgin Atlantic's complaint dating back to 1993 against British Airways' corporate discount packages and travel agent policy. Virgin alleges BA provides cross-subsidies on tickets offered to corporate clients to undercut rivals on competitive routes and offered a discriminatory commission structure to travel agents. BA denies the charges.
Separately, the Commission continues to push for external competence in applying competition rules to non-European union operators which operate into the single market.
Source: Airline Business
