Case T‑296/18
Polskie Linie Lotnicze ‘LOT’ SA
v
European Commission
Judgment of the General Court (Tenth Chamber, Extended Composition), 20 October 2021
(Competition – Concentrations – Air transport – Decision declaring a concentration compatible with the internal market and the EEA Agreement – Relevant market – Assessment of the effects of the concentration on competition – Commitments – Obligation to state reasons)
1. Concentrations between undertakings – Examination by the Commission – Definition of the market in question – Factual premisses in the context of the concentration – Verification of the accuracy and relevance of the facts relied on
(Council Regulation No 139/2004, Arts 2 and 6)
(see paragraphs 37, 38, 42-57)
2. Concentrations between undertakings – Examination by the Commission – Definition of the market in question – Material scope – Undertaking concerned – Definition – Partial transfer of assets – Assessment by reference exclusively to the assets transferred
(Council Regulation No 139/2004, Arts 2, 3(1)(b) and 5(2); Commission Notice 2008/C 95/01, para. 136)
(see paragraphs 59-62)
3. Concentrations between undertakings – Examination by the Commission – Definition of the market in question – Concentration between two airlines providing for the transfer of slots – Criteria – Substitutability of products – Approach taken by the airport with which the slots concerned are associated
(Council Regulation No 139/2004, Art. 2; Commission Regulation No 802/2004, Annex I, Section 6; Commission Notice 97/C 372/03, paras 13 to 17, 20, 21 and 24)
(see paragraphs 65, 66, 73-76, 79-81, 86)
4. Concentrations between undertakings – Examination by the Commission – Definition of the market in question – Concentration between two airlines providing for the transfer of slots – Burden of proof borne by the party challenging the definition of the market in question – Need to adduce serious indicia of the genuine existence of a competition concern requiring an examination by the Commission – Failure to produce sufficient evidence by the party challenging the approach adopted
(Council Regulation No 139/2004, Arts 2 and 6)
(see paragraphs 67, 82-85, 87, 88)
5. Concentrations between undertakings – Assessment of the compatibility with the internal market – Examination by the Commission – Assessment of the effects of the concentration on competition – Economic assessments – Discretion – Judicial review – Scope and limits
(Art. 263 TFEU; Council Regulation No 139/2004, Arts 2 and 6)
(see paragraphs 92, 93)
6. Concentrations between undertakings – Assessment of the compatibility with the internal market – Concentration between two airlines – Examination by the Commission – Assessment of anticompetitive effects – Compliance with the guidelines adopted by the Commission – Consideration of the elements of assessment mentioned in those guidelines – Discretion of the Commission – Examination of the market share levels
(Council Regulation No 139/2004, recital 32 and Art. 2; Commission Notice 2004/C 31/03, para. 18)
(see paragraph 132)
7. Concentrations between undertakings – Assessment of the compatibility with the internal market – Criteria – Anticompetitive effects – Alleged reinforcement of barriers to market entry – Information insufficient in itself to establish a significant impediment to effective competition
(Council Regulation No 139/2004, Arts 2 and 6)
(see paragraphs 133-136)
8. Competition – Transport – Competition rules – Air transport – Adoption by the Commission of a decision finding a concentration compatible with the internal market without opening Phase II – Concentration between two airlines providing for the transfer of slots – Infringement of rules for the allocation of slots in Regulation No 95/93 – None
(Council Regulation No 139/2004, Arts 2(2) and 3; Council Regulation No 95/93, Art. 8a(2))
(see paragraphs 141-142)
9. Concentrations between undertakings – Examination by the Commission – Adoption of a decision finding a concentration compatible with the internal market without opening Phase II – Condition – No serious doubts – Commitments of the undertakings concerned capable of rendering the notified operation compatible with the internal market – Margin of discretion – No manifest error of assessment – Examination of any possible efficiency gains likely to result from that concentration and of the sufficiency of the commitments given – Not required
(Council Regulation No 139/2004, recital 29 and Arts 2(2) and 6(1)(b) and (2); Commission Regulation No 802/2004, Annex I, Section 9; Commission Notice 2004/C 31/03, paras 78 and 84 to 87)
(see paragraphs 146-149, 152-155)
10. Concentrations between undertakings – Assessment of the compatibility with the internal market – Criteria – Anticompetitive effects – Failure to consider rescue aid granted to the transferor, in particular, to enable the orderly sale of its assets – Burden of proof borne by the party challenging the decision that the concentration is compatible – Assessment
(Council Regulation No 139/2004, Arts 2(1)(b) and (2), and 6(1)(b) and (2))
(see paragraphs 160-166)
11. Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision declaring a concentration compatible with the internal market
(Art. 296 TFEU; Council Regulation No 139/2004, Arts 2 and 6(1)(b) and (2))
(see paragraphs 169-175)
Résumé
The General Court dismisses the actions of Polskie Linie Lotnicze ‘LOT’ against the Commission decisions authorising the mergers concerning the acquisition by easyJet and Lufthansa, respectively, of certain assets of the Air Berlin group
Faced with a persistent deterioration of its financial situation, in 2016 Air Berlin plc implemented a restructuring plan. In that context, on 16 December 2016, it entered into an agreement with Deutsche Lufthansa AG (‘Lufthansa’), in order to sublet to it various aircraft along with their crew.
However, the loss of the financial support, in the form of loans, granted to Air Berlin by one of its main shareholders forced it to file for insolvency on 15 August 2017. In those circumstances, the granting of a guaranteed loan by the German authorities as rescue aid, endorsed by the Commission, (1)was intended to enable Air Berlin to continue its operations for a period of three months, in order to allow it, inter alia, to dispose of its assets.
That objective was reflected, in particular, by the conclusion of two agreements: first, an agreement concluded on 13 October 2017 providing for the takeover by Lufthansa of, inter alia, a subsidiary of Air Berlin, to which various aircraft and their crew, as well as slots (2) that Air Berlin held at a number of airports, including, in particular, Düsseldorf, Zurich, Hamburg, Munich, Stuttgart and Berlin-Tegel, were to be transferred in advance, and, second, an agreement concluded on 27 October 2017 with easyJet plc, aimed mainly at transferring the slots held by Air Berlin, in particular at Berlin-Tegel airport, to easyJet. Air Berlin ceased its operations on the following day, before being declared insolvent by judicial decision of 1 November 2017.
On 31 October 2017, Lufthansa gave notice to the Commission, pursuant to the latter’s powers to control concentrations, (3) of the operation provided for by the agreement of 13 October 2017. On 7 November 2017, easyJet, in the same manner, gave notice of the operation provided for by the agreement of 27 October 2017 (together with the operation notified by Lufthansa, ‘the mergers in question’). In the light of the commitments given by Lufthansa, (4) the Commission found the merger notified by Lufthansa to be compatible, by Decision C(2017) 9118 final of 21 December 2017, as it did with the merger notified by easyJet, by Decision C(2017) 8776 final of 12 December 2017 (collectively, ‘the contested decisions’). The Commission concluded that the mergers in question did not raise serious doubts as to their compatibility with the internal market. On that occasion, for the first time in cases concerning air passenger transport services, the Commission did not define the relevant markets by city pairs between a point of origin and a point of destination (‘the O & D markets’). First, it found that Air Berlin had ceased its operations prior to and independently of those mergers. It concluded that Air Berlin had withdrawn from all the O & D markets in which it had previously been present. Second, it held that the mergers in question mainly concerned the transfer of slots and found that those slots were not allocated to any particular O & D market. Consequently, it considered it preferable to aggregate, for the purposes of its analysis, all the O & D markets to and from each of the airports with which those slots were associated. In doing so, it defined the relevant markets as those for air passenger transport services to and from those airports. The Commission then went on to verify that those mergers were not such as to create ‘a significant impediment to effective competition’, in the present case, in particular, by providing easyJet and Lufthansa, respectively, with the ability and incentive to foreclose access to those markets.
Considering that the analysis carried out by the Commission was incorrect, in terms of both its methodology and its results, Polskie Linie Lotnicze ‘LOT’ (‘the applicant’), which presents itself as a direct competitor of the parties to the mergers in question, brought two actions before the Court, each seeking the annulment of one of the contested decisions.
By its judgments of 20 October 2021, the Court dismisses those actions, thus accepting, in particular, that the Commission could confine itself to a joint examination of the O & D markets to and from the airports with which Air Berlin’s slots were associated, instead of examining individually each of the O & D markets in which Air Berlin, on the one hand, and Lufthansa and easyJet, on the other, were present.
Findings of the Court
In the first place, with respect to the plea alleging a poor definition of the relevant markets, the Court considers, first of all, that it is futile for the applicant to seek to challenge the factual accuracy of the presentation, made by the Commission, of the mergers in question and of their context. In that connection, the Court observes, inter alia, that the Commission was entitled to find that Air Berlin’s operations had ceased prior to the mergers in question and independently of them, and that, as a result, Air Berlin was no longer present in any O & D market. Next, in so far as Air Berlin’s slots were not associated with any O & D market, the Court considers that the Commission rightly pointed out that the slots could be used by Lufthansa and easyJet, respectively, in O & D markets other than those in which Air Berlin operated. Consequently, it holds that, unlike concentrations involving airlines which are still in operation, it was not certain, in this particular case, that the mergers in question would have any effect on competition in the O & D markets in which Air Berlin had been present before it ceased its operations. Lastly, the Court states that the applicant has not made a plausible case that the individual examination of the O & D markets that it identified could have made it possible to determine the existence of a significant impediment to effective competition that could not be revealed by the market definition adopted by the Commission.
In the second place, with respect to the plea alleging a manifest error in the assessment of the effects of the mergers in question, the Court recalls, at the outset, that, when exercising the powers conferred on it by the EC Merger Regulation, the Commission has a certain discretion, especially regarding complex assessments of an economic nature which it is called upon to make in that regard. Consequently, review by the EU judicature of the exercise of that discretion must take account of the margin of discretion thus conferred on the Commission. Having stated the above, the Court considers that the analysis of the effects of the mergers in question on the markets of air passenger transport services to and from the airports concerned did not reveal any manifest error of assessment, taking into account, inter alia, the low rate of congestion at those airports and the limited effect of those mergers on the increase in the slot shares held by Lufthansa and easyJet. With respect to, more specifically, the merger notified by Lufthansa, the applicant is not justified in claiming that the Commission had committed a manifest error in its assessment of the effects of the agreement of 16 December 2016 given, inter alia, that that agreement had already permitted Lufthansa to operate aircraft and their crew for a period of six years before Lufthansa definitively acquired them in connection with that merger. Lastly, as regards the merger notified by easyJet, the Court notes that the slots are necessary for the provision of air passenger transport services. It concludes that there is a ‘vertical’ relationship between the allocation of those slots and the provision of those services and that the Commission was therefore entitled to refer to the guidelines on ‘non-horizontal’ mergers. (5)
In the third place, the Court rejects the complaints alleging that the commitments given by Lufthansa in connection with the merger of which it gave notice were insufficient, and that no such commitments were given as regards the merger of which easyJet gave notice, on the ground that the applicant is not justified in claiming that those mergers are manifestly liable to constitute a significant impediment to effective competition. For that reason, it also considers unfounded the applicant’s complaints that the Commission failed to take account of any potential efficiency gains which might have resulted from those mergers.
In the fourth place, the Court observes that the applicant has not shown that the financial support which Air Berlin had received under the rescue aid formed part of the assets transferred to easyJet and Lufthansa, respectively, in connection with the mergers in question, and, consequently, rejects the complaints that the Commission should have taken account of that aid for the purposes of its analysis. Furthermore, as regards the infringement of Article 8a(2) of Regulation No 95/93, (6) also alleged by the applicant in one of its actions, the Court notes that the Commission lacked competence to apply that provision.
Lastly, having held that the applicant’s plea alleging a failure to state reasons was unfounded and, thus, having rejected all the pleas in law relied on in each of the two cases, the Court rules that the two actions are to be dismissed, without there being any need, in those circumstances, to rule on their admissibility.