The European Commission must re-examine the request made by Lufthansa and Swiss concerning the waiver of their pricing commitments for the Zürich-Stockholm route, the General Court of the EU ruled in a judgment returned on Wednesday 16 May (case T-712/16).
On the other hand, the General Court rejected Lufthansa’s appeal concerning the Zürich-Warsaw route.
In 2005, the Commission authorised, subject to conditions, the acquisition of Swiss by Lufthansa, a co-founder of Star Alliance, the world’s largest alliance of airlines. As regards the Zürich-Stockholm and Zürich-Warsaw routes, the companies undertook to ensure that every time the merged entity reduced tariff on a comparable line, it would have to apply an equivalent reduction, until such time as a new provider began operating on the lines in question.
This was how Lufthansa and Swiss responded to the Commission’s competition concerns on the two routes, which were operated only by Swiss and SAS (Zürich-Stockholm) and LOT (Zürich-Warsaw), both of which airlines are members of Star Alliance.
In November 2013, Lufthansa and Swiss requested an exemption for the pricing commitments in question, stressing in particular that the Commission had since changed its policy over its treatment of alliance partners when examining merger operations and that there was genuine competition between Swiss on the one hand and SAS and LOT on the other.
In July 2016, the Commission rejected the request, as it considered that the conditions to lift the commitments had not been met.
In its judgment, the General Court overturned the Commission’s decision concerning the Zürich-Stockholm route.
First of all, the General Court observes that the decision concerning a request for the waiver of commitments aims to verify whether the competition issues referred to in the 2005 decision authorising the merger between Lufthansa and Swiss, subject to abiding by the commitments, have ceased to exist.
With regard to this, the Commission admittedly has discretionary powers, but is required to pay careful attention to the request and, if necessary, carry out an investigation.
However, the General Court considers that the Commission failed to fulfil that obligation. In particular, it did not examine the impact on competition of the termination of the joint venture agreement concluded between Lufthansa and SAS in 1995. It did not adequately answer Lufthansa’s argument that the Commission had changed its policy by no longer taking alliance partners into account for the determination of affected markets. In addition, the Commission should have taken account of the code-sharing agreement entered into between Swiss and SAS in 2006, and thus after the 2005 decision approving the merger.
As regards the Zürich-Warsaw route, on the other hand, the General Court holds that in the absence of any change in the contractual relationship between Swiss and LOTS in light of which the pricing commitments were made binding by the 2005 decision, the failures established are not sufficient to cause the contested decision to be annulled so far as that route is concerned. (Original version in French by Mathieu Bion)