Friday, January 29, 2010

oneworld, Slots, and Approval

The Wall Street Journal is reporting that the oneworld Alliance is in discussions with the European Commission's Competition Authority about a possible surrender, lease, or sale of slots at London Heathrow in order to secure approval for the joint venture under the EC Treaty.  See Kaveri Niththyananthan & Daniel Michaels, Oneworld Airline Partners Discuss Concessions with EU, Wall St. J., Jan. 29, 2010 (available here). 

The story mischaracterizes the EC regulatory process, however, by stating that the slot concessions would be made in exchange for antitrust immunity.  The Commission has no such authority.  Instead, it has the power to determine whether or not an alliance is in conformity with Article 81(1) of the EC Treaty which prohibits, as incompatible with the common market, all intercorporate agreements, decisions by associations of corporations, and concerted practices that "may affect trade between [EU] Member States" and have "as their object or effect the prevention, restriction or distortion of competition within the common market."  Article 81(2) declares all practices prohibited under Article 81(1) "automatically void," while Article 81(3) holds out an exemption (which will render Article 81(1) "inapplicable") for agreements or practices that, in general, advanced consumer welfare by improving the production and distribution of goods or promote technical or economic process.  An exempted agreement, such as one governing an airline alliance, must not--in U.S. antitrust terms--impose unreasonable ancillary restrictions or enhance market power in respect of a substantial part of the products in question.

As the story notes, the Commission has already sent oneworld a statement of objections concerning the alliance's potential to harm competition in the transatlantic market.  It is incumbent on oneworld now to assuage the Commission's fears, much in the way SkyTeam did in 2007 when its carriers opted to surrender slots and enter into interlining agreements with non-alliance members.  See Antitrust: Commission Market Tests Commitments from Eight Members of SkyTeam Concerning Their Alliance Cooperation, IP/07/1558 (Oct. 19, 2007) (available here).  While the oneworld Alliance has maintained that slot surrender is unnecessary for it to win antitrust immunity from the Department of Transportation, see Joint Applicants' Answer to the Department of Justice's Motion for Leave and Comments, at 8, Dkt. No. DOT-OST-0252 (Jan. 11, 2010) (available here), it may have a harder time selling this argument to the Commission given the precedent set by SkyTeam.  On the other hand, if oneworld does surrender slots to appease the Commission, it may have the effect of simultaneously satisfying opponents of the alliance's U.S. immunity bid (most notably the Justice Department) that the venture won't close off access to Europe's busiest airport.  Cf. Joint Application of American Airlines, Inc. et al., Comments of the Department of Justice, Dkt. No. OST-2008-0252 (Dec. 21, 2009) (available here).

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