By Simon Zekaria - 17th December 2003
Europe’s lower court has backed European Commission regulators for imposing a fine of €6.8 million on UK air carrier British Airways in 1999.
Brussels competition authorities fined the flagship airline for conducting ‘performance reward schemes’ with travel agencies that set financial bonuses according to volume of tickets sold.
And in Wednesday’s court judgment the European Court of First Instance agreed with the decision four years ago, based on averting abuse of sector competition under EU law.
In the verdict the CFI struck down BA on abuse of market position, saying “the performance reward scheme has the effect of restricting the freedom of United Kingdom agencies to supply their services to the airlines of their choice [..] without that system being based on any economically justified consideration”.
The court also confirmed that BA “holds a dominant position on the United Kingdom market for air travel agency services” and that the defence argument that no-such similar fine has been imposed on rival airlines in this context “does not warrant lifting the infringement established against BA”.
BA also appealed the commission had no such powers to apply the fine in 1999 since the EU executive collectively resigned over fraud four months before the decision on the airline was filed.
Yet the court struck down the charge, since “the Commissioners [...] retained their full powers until they were replaced” in September that year.
The case goes back to 1993 when air rival Virgin Atlantic lodged a complaint with the commission over the bonus deals set up between BA and travel agents registered under the International Air Transport Association (IATA).
BA reviewed the system by 1998 – setting a basic commission rate of 7 per cent, with an extra 3 per cent and 1 per cent available for international and domestic tickets respectively – in comparison with the original bonus plan based on a full financial year.
But Virgin, unhappy with the revised deal, filed a second complaint with European regulators in January that year.
In 1999, the commission ruled against BA for the incentive scheme and set the fine; so initiating an appeal from the airline to the European courts.
British airways expressed “disappointment” with Wednesday’s ruling.
“In practice, the ruling will not change the way we are doing business as we changed our incentive arrangements to comply with the commission decision back in 1999,” said a spokesman.
“We will study the judgment and consider over the next few weeks whether to appeal to the European Court.”
Under EU law, BA has two months to bring an appeal to Europe’s highest court, the European Court of Justice.
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