www.tourismlaw.pt Competition Law: Online Travel Agents and Airlines Sarah Prager DEKA Chambers International Journal of Tourism, Travel and Hospitality Law PRE-PRINT
Competition Law: Online Travel Agents and Airlines Introduction; The Business Model; The Ryanair Proceedings in the Republic of Ireland; The On the Beach Proceedings in England; The Competition Claim; The Defence; EU Competition Law; Article 101 TFEU; Article 102 TFEU; Comment Introduction In 1841 Thomas Cook, an English Baptist preacher, struck a deal with the Midland Railway to organise the transportation of members of his temperance society, receiving a commission from the railway, and efectively becoming the world’s frst recorded travel agent. The industry has never looked back. In 1903 the American Wright brothers completed the frst controlled powered fight, and the Age of Aviation began. The 1920s saw rapid growth in the aviation industry and the founding of numerous airlines still operational today. The introduction of modern long-range commercial aircraft in the 1950s fuelled a desire for foreign travel which remains as strong today as it was then; and which, thanks to reductions in cost, is now much more accessible. Every year the UK government conducts a Travel Trends survey, which aims to identify British travel habits; in 2019 : 1 • Overseas residents made 40.9 million visits to the UK, an increase of 0.6 million compared with 2018. • Overseas residents spent £28.4 billion on visits to the UK, an increase of 7% compared with 2018. Travel trends - Ofce for Natonal Statstcs (ons.gov.uk) 1
• There were 93.1 million visits overseas by UK residents, an increase of 3% compared with 2018. • UK residents spent £62.3 billion on visits overseas, an increase of 7% compared with 2018. By contrast, in 2021 , a year afected by the Covid-19 pandemic and 2 the measures taken to contain it: • Overseas residents made 6.4 million visits to the UK; this was 43% less than in 2020 as travel continued to be reduced because of the pandemic. • Overseas residents spent £5.6 billion on their visits to the UK; this was 9% less than in 2020. • UK residents made 19.1 million visits abroad, which was 20% less than the previous year and was because of the continued travel restrictions. • UK residents spent £15.5 billion on visits abroad; this was a 13% increase on 2020. It is in this context, of a highly proftable industry hit by a highly unusual catastrophic event, that the current relationship between airlines and travel agents and tour operators must be seen. In some quarters the relationship appears to be breaking down; the chief executive of one large UK tour operator has recently described the airline industry as being ‘despicable’ in its treatment of consumers, which, he said, has afected the way the entire travel industry is seen . He went on to say: 3 “…The way the airline industry has acted in the last three years is nothing short of despicable…Throughout the pandemic customers got treated really badly...” Travel trends - Ofce for Natonal Statstcs (ons.gov.uk) 2 Jet2 boss says ‘despicable’ airline sector tarnished industry’s image | Travel Weekly 3
Against this background, there is ongoing litigation between one airline in particular and a number of online travel agencies which raises some intriguing questions around where the balance of power lies in the industry; and who bears responsibility to consumers when things go wrong. The Business Model In illustrating the nature of the relationship between airlines and online travel agents, it is convenient to use as an example a case currently proceeding through the English courts: On the Beach v Ryanair [2022] EWHC 861 (Ch). The parties’ business models are set out in that case as follows: On the Beach (‘OTB’) ofers services via the web and apps for mobile devices. These enable consumers to book short-haul package holidays online. Although it has an international segment which ofers holidays from websites in Sweden, Norway and Denmark, the vast majority (99.7%) of holidays are booked via its UK-facing website and app, and almost all of these depart from the UK. It operates as a ‘one-stop shop’ where customers can select various components of their holiday, such as fights and hotels, from diferent providers, and buy them in a single transaction. That includes Ryanair fights. For most fights, including Ryanair fights, OTB makes the booking (or attempts to do so) as agent on the customer's behalf. In providing its services it is directly competing with Ryanair both in providing fight booking services to customers and in ofering to arrange ancillary travel services such as hotel accommodation and car hire. Ryanair, so OTB says, does not welcome such competition, but wants to own the customer relationship itself, monopolise the market for booking its fights, and reduce competition and choice for ancillary
services. In pursuit of this end, OTB alleges that Ryanair has not only engaged in multiple litigation against online travel agents and their service providers, but adopted a multi-faceted course of conduct aimed at preventing such competition. This is said to include making false and disparaging claims about online travel agents, including OTB; attempting to prevent OTB from completing bookings on behalf of its customers; refusing to allow OTB customers to check in online, or requiring them to undergo a verifcation process which makes it difcult for OTB to perform its services for them; and withholding refunds from OTB customers. Ryanair, on the other hand, asserts that as a low-fare airline its business model is based on being able to sell its fights directly to customers, thereby maximising its opportunities to sell ancillary products to them. It therefore predominantly advertises, markets and sells its fights to customers via its own website and not through travel agents or other online platforms. Online travel agents such as OTB obtain data regarding Ryanair fights by screen-scraping Ryanair's website in order 4 to display Ryanair's fight information on their own websites. OTB is one of a number of online travel agents which do this, and has been doing it for ten years. Ryanair contends that this practice has caused wide-ranging difculties both reputationally and economically. In the words of chief executive Michael O’Leary: “They are a real pain in the arse, these OTAs, disrupting our communications with customers.” First, due in large part to the fact that agents such as OTB do not provide Ryanair with the personal e-mail address of the customer but Screen-scraping is the practice of using software to interact with a website to extract 4 information from it such as price, flight and timetable information.
instead with an e-mail address generated by the agent, customers have experienced a suboptimal experience with the airline. Some customers have not been informed of cancellations, Ryanair has been unable to assist with customer service queries, and in one case Ryanair sufered adverse publicity when a letter of apology did not reach a customer. Secondly, it is said that screen-scraping interferes with Ryanair's business model. Ryanair bears the signifcant costs involved in hosting and operating its website and regards the actions of the online travel agents as the unauthorised taking and use of its property at its expense, depriving it of the ability to sell ancillary products which is what enables it to operate its low-cost model. In addition, the airline contends that this practice by online travel agents has inhibited Ryanair from complying with its own regulatory obligations. To satisfy various regulatory obligations Ryanair needs to liaise with its passengers directly, and it requires customers' own e-mail addresses to do this. Without the direct email addresses it cannot, for example, process refunds or provide information required by its regulator. Ryanair's position is that screen-scraping constitutes a breach of the terms of use of its website and an infringement of its intellectual property rights. The Ryanair Proceedings in the Republic of Ireland A decade or so ago Ryanair took action against a number of online travel agents in its home courts in the Republic of Ireland. It made claims against OTB, the Romanian travel agent SC Vola.ro SRL, the German agent Billigfuege.de GmbH and the British company Skycsanner Limited, claiming various relief for breach of contract and for infringement of its intellectual property rights arising from the agents’ practice of screen-scraping its fights. These proceedings have been
rumbling through the Irish courts since that time, with various periods of activity and inactivity on the part of the airline; but it would appear that they are now active and that Ryanair wishes to pursue them within the Irish jurisdiction. The On the Beach Proceedings in England In the meantime, on 10th June 2021 OTB issued proceedings against Ryanair within the courts of England and Wales alleging abuse of a dominant market position, and the tort of causing loss by unlawful means, and claiming damages and injunctive relief accordingly. Ryanair denies that its conduct is anti-competitive and intends to defend the claim on the basis that OTB’s screen-scraping practice amounts to a breach of contract and an infringement of its intellectual property rights. In a broad sense, these proceedings relate to the same type of business practices as those complained of by Ryanair in the Irish proceedings, and accordingly, the frst salvo in the case was fred by Ryanair in the form of a jurisdictional challenge; it was said that the English courts should stay the proceedings within their jurisdiction because they are related to the Irish proceedings, and the Irish courts were frst seised of them. It was common ground between the parties that the application was governed by the pre-Brexit regime , thus the matter was 5 considered by the English High Court by reference to the recast Brussels Convention (‘recast Brussels’). 6 Pursuant to Article 29(1) of recast Brussels: “Without prejudice to Article 31(2), where proceedings involving the same cause of action and between the same parties are brought in the courts of diferent Member States, any court other than the court frst This was because the Irish proceedings were instituted prior to Exit Day. 5 EU Regulation 1215/2012. 6
seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court frst seised is established.” Pursuant to Article 30 of recast Brussels: “(1) Where related actions are pending in the courts of diferent Member States, any court other than the court frst seised may stay its proceedings. (2) Where the action in the court frst seised is pending at frst instance, any other court may also, on the application of one of the parties, decline jurisdiction if the court frst seised has jurisdiction over the actions in question and its law permits the consolidation thereof. (3) For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.” The Court considered that the Irish and English proceedings were not related and that they might never become related; this was due to the fact that the competition defence had not yet been pleaded by OTB in the Irish claim, and since it had applied to strike out those proceedings for want of prosecution, it might well never reach the point of fling any defence to them. The English proceedings will therefore proceed. As indicated, they raise interesting questions of competition law and of whether or not screenscraping is a business practice which ought to be tolerated by the courts.
The Competition Claim In its action against Ryanair, OTB asserts that: OTB (like other online travel agents) competes with Ryanair both in providing fight booking services to consumers, and in ofering to arrange ancillary travel services such as hotel accommodation. It also competes with other airlines, ancillary travel service providers, and traditional travel agents (as well as other online travel agents). It has, together with other online travel agents and price comparison websites, brought increased competition in these respects, providing real benefts to consumers: (1) Compared to booking diferent holiday components (for example, fight and hotel) with diferent providers: (a) OTB provides a “one-stop shop”; (b) As OTB enables customers to purchase multiple travel services in one transaction, it assumes a number of obligations under the Package Travel and Linked Travel Arrangements Regulations 2018 , including an 7 obligation to ensure the proper performance of the package holiday (even though OTB is not the provider of the individual components), and to allow the consumer to transfer the package holiday to another person. (2) Compared to booking directly with an airlines such as Ryanair, OTB enables consumers to compare prices across, and choose between, a wide range of airlines and hotels, and combine them at will, including by combining inbound and outbound fights from diferent airlines. The UK iteration of the Package Travel Directive 2015/2302. 7
(3) Compared to booking with a traditional travel agent, OTB allows consumers to book the holiday of their choice quickly and efciently at any time of the day or night, without needing to visit the agent in person, or deal with the agent by phone during ofce hours or through protracted email communications. (4) Further, unlike many providers, including Ryanair: (a) OTB holds customer monies in a ring-fenced trust account; (b) OTB package holidays are also ATOL-protected (which ensures that OTB Customers would not lose money, or become stranded abroad, were OTB to collapse); (c) OTB manages customers’ holidays on their behalf. For example, if the time of a fight changes, OTB will automatically reschedule the transfer; (d) OTB vets the travel service providers with whom it works for quality, and can sometimes ofer prices not available to consumers when they book directly; (e) OTB customers are able to pay for their holidays in instalments. (5) More generally: (a) Price comparison services such as OTB increase transparency, and so increase competition among travel service providers, resulting in lower prices for consumers, as well as increased transparency and, therefore, choice; (b) Increased competition from online travel agencies such as OTB lead to greater benefts to consumers generally. For example, OTB operated a promotion whereby it arranged free Covid-19 tests for its customers.
According to OTB, Ryanair does not welcome these enhanced consumer experiences, taking the view that they represent signifcant and unwanted competition with the airline. As a result, so OTB asserts, Ryanair has engaged in a strategy of disruption to online travel agencies’ business models. It is in this context that OTB invites the court to see Ryanair’s litigation against multiple online travel agencies and their service providers in the Republic of Ireland and elsewhere in the EU. In parallel with this litigation, OTB alleges that Ryanair has adopted a multi-faceted course of conduct aimed at preventing competition from online travel agencies, including OTB; a course of conduct that constantly evolves over time and has encompassed the use of the pandemic to further Ryanair’s goal of driving online travel agencies from the market. That course of conduct (described by OTB as ‘the Campaign’) is said to be unlawful because it is anti-competitive. The Campaign is said by OTB to comprise the following: (1) Ryanair makes false and disparaging claims about OTB. OTB assert that Ryanair has repeatedly and publicly (including through media briefngs and press releases, social media, customer emails and its website) made claims about online travel agencies, including OTB, that are disparaging and untrue (generally, or at least as far as OTB is concerned), including: (a) that OTB provides “fake information” about its customers to Ryanair, including ‘fake email addresses’. (b) that OTB’s alleged use of ‘fake’ email addresses prevents Ryanair from providing OTB Customers with important information related to their fights.
(c) that OTB’s alleged use of ‘fake’ email addresses prevents OTB Customers from viewing their itinerary, managing their booking, or checking in on Ryanair’s website. However, OTB provides its customers with login details for the Ryanair account used for the booking, and alleges that in fact Ryanair deliberately blocks OTB customers from managing their bookings or checking in online, in breach of those customers’ contractual rights, in a deliberate attempt to degrade their experience. (d) that OTB uses ‘fake credit cards’ when paying for fights on behalf of its customers, when in fact OTB uses its own, valid, credit cards (which Ryanair has historically accepted as payment on a large number of occasions) in order to provide additional services such as allowing customers to pay in instalments, and to allow OTB to use its card issuers’ chargeback procedures to obtain refunds from Ryanair. (e) that OTB ‘obstructs refunds’, making it more difcult for Ryanair to refund OTB customers. In fact, so OTB says, it typically refunds customers in accordance with its own obligations, whether or not it has received a refund from the relevant airline. Furthermore, it is a matter of record that OTB has often refunded OTB Customers the cost of cancelled Ryanair fights without Ryanair having provided any refund itself, thus necessitating a separate legal claim brought by OTB against Ryanair in respect of refunds made by OTB to customers for cancelled Ryanair fights, in respect of which Ryanair has still not reimbursed OTB. (f) that OTB applies ‘massive mark-ups’ to the cost of fights, which OTB vehemently denies, stating: “This is false. Like any business operating as a going concern, OTB makes a margin on the services it provides…but it operates in a highly
competitive industry and its profts are thus constrained to competitive levels…competition from OTB, and the services it provides, lead to lower, not higher, prices for consumers.” (2) Ryanair attempts to prevent OTB from completing bookings on behalf of its customers. These, OTB alleges, have taken two main forms: (a) Account blocking. Once Ryanair has identifed that OTB (or indeed any online travel agent) is attempting to make a booking, Ryanair prevents the agent from creating or activating a ‘myRyanair account’, which is required to make the booking. For instance, OTB has received an error message that an account has already been created with a particular email address (which is not the case), or Ryanair has not sent through the email that it normally sends when a myRyanair account is created, containing a link or code to activate the account. Without being able to create or activate the myRyanair account, OTB cannot use it to complete a booking on the OTB customer’s behalf. (b) Payment blocking. Alternatively, where OTB has been able to create and activate a myRyanair account on its customer’s behalf, Ryanair has prevented it from completing the booking at the payment stage. When OTB attempts to pay for a Ryanair booking on an OTB customer’s behalf, using an OTB credit card as described above, Ryanair’s website often reports that the booking cannot be completed, without explanation. OTB therefore believes that Ryanair may have put in place measures deliberately aimed at causing attempted payments to fail if they are identifed as originating from an online travel agent. To date, OTB has sought to work around such attempts by Ryanair to prevent it from completing bookings on OTB Customers’ behalves. However, it
believes that Ryanair is continuously seeking to block such workarounds and, if it can, will do so in the future. (3) Ryanair is engaged in strategies intended to degrade the experience of customers of online travel agents. It is alleged that even where, notwithstanding Ryanair’s strategies outlined above, OTB has successfully booked Ryanair fights on behalf of OTB Customers, Ryanair has engaged in further conduct intended to degrade such customers’ experience and deter them from using OTB again. In the relevant period, it is alleged that this conduct has taken two principal forms: (a) Since around December 2020, Ryanair has refused to allow OTB customers identifed by Ryanair as such to manage their bookings, or check in, online, requiring them instead to face the considerable inconvenience and time costs of checking in at the airport. When OTB customers thus prevented from checking in online by necessity checked in at the airport, Ryanair in some cases purported to charge them additional fees (in the sum of €55 per person per fight leg) for doing so. Ryanair has since claimed that the imposition of such charges was inadvertent, but OTB clearly does not accept that this is the case, given the background relations between the businesses. Until the beginning of July 2021, this refusal to provide online services was absolute; however, from 2nd July 2021, rather than simply refusing to allow OTB customers identifed by it as such to manage their bookings, or check in, online, it is said that Ryanair introduced a new (and ongoing) course of conduct, whereby:
(i) it tells OTB customers that they will not be permitted to manage their bookings, or check in, online, without going through a so-called ‘online verifcation process’; (ii) to complete that process customers are required to follow an onerous procedure, which includes uploading a photograph of their passport or identifcation card, providing a video of their face, providing a personal email address (to which all future communications will be sent), and paying a 35 euro cent fee; and where such an OTB customer chooses not to undertake the online verifcation process, Ryanair continues to refuse to allow them to manage their booking, or check in, online, OTB contends that these onerous requirements are a breach of the airline’s obligations to its customers. Furthermore, it says, whilst imposing them, Ryanair has further sought to undermine its customers’ trust and confdence in OTB; when informing customers that they are unable to check in online and when they do eventually check them in at the airport, Ryanair has informed them, wrongly, that they are entitled to a lesser consumer experience than other customers who have booked directly with the airline. In addition, when informing OTB customers of its online verifcation requirement, Ryanair calls OTB ‘a third party intermediary or BOT [sic]’ that is not ‘authorised’ to ofer Ryanair fights for sale, and suggests to customers that OTB may have imposed ‘massive mark-ups’ on top of Ryanair’s own prices. OTB contends that Ryanair’s imposition of the online verifcation requirement makes it (as Ryanair intends) very difcult for OTB properly to perform the services it ofers its customers, both before and after any completion of the online verifcation process by those customers:
(i) Before completion of the online verifcation process, Ryanair’s refusal to allow OTB customers to manage their bookings online applies equally to any attempt by OTB to manage such bookings on their behalves. OTB is thus prevented from making any changes to bookings that those OTB customers might request. (ii) After completion of the online verifcation process, OTB is placed in, if anything, an even more difcult position. First, the position described at (i) above continues to apply unless and until the OTB customer informs OTB of the email address supplied by them during the process (and, if necessary, any changed password). Second, in requiring OTB customers to provide a personal email address to which all future communications will be sent, Ryanair creates a situation whereby OTB may not be aware of changes to a booking (for example, a fight cancellation or change) unless the customer takes additional steps to inform OTB of that change. As customers use package holiday providers to avoid the need to manage all aspects of the holiday, this additional burden on the customer degrades the customer experience and undermines confdence in OTB. It is fundamentally at odds with the reason why OTB customers use OTB as an agent or intermediary in the frst place, as Ryanair is well aware. In the event that customers do not make OTB aware of a change, OTB would not be aware of changes to fights that require it to make amendments to other parts of the holiday: failure to make such amendments will, inevitably, degrade OTB customers’ holiday experience and further undermine trust and confdence in OTB. (4) Ryanair deliberately withholds refunds from OTB Customers. For the layperson, this is perhaps the allegation of greatest concern; and for the lawyer, it is a shocking assertion that an airline has
deliberately breached its obligations to a particular class of consumer in furtherance of its own business strategy. According to OTB, Ryanair has unjustifably sought to exploit the circumstances of the Covid-19 pandemic in order to exert fnancial pressure on OTB, and reduce its efectiveness as a competitor, by withholding refunds sought by OTB, where Ryanair has cancelled those customers’ fights. OTB has therefore, in accordance with its legal obligations as an organiser of package holidays itself been forced to fund refunds to its customers, totalling £48.7 million to date of issue. Of those sums, OTB has been able to recover approximately £43.5 million, primarily through the use of the chargeback facility of the credit cards it uses to book its customers’ fights. It alleges that Ryanair has sought to prevent such chargebacks, created further unnecessary obstacles to providing refunds, and generally refused constructively to engage with OTB’s concerted attempts to agree a more collaborative arrangement. Ryanair has sought to justify such practices by claiming that they are necessary to protect consumers, because online travel agents do not promptly pass on refunds from Ryanair to their customers. This, according to OTB, is untrue, at least as far as it is concerned. Ryanair’s true motive for this practice, so it is said, is to weaken OTB including through fnancial pressure and negative publicity, and – by requiring OTB customers to apply directly to Ryanair for refunds – to gather data by which it can improve its ability to prevent OTB from making bookings for OTB customers, and/or degrade those customers’ experiences after such bookings are successfully made. In short, OTB’s case is that Ryanair has used the circumstances of the Covid-19 pandemic to fuel its smear campaign against OTB, and to exacerbate that smear campaign by seeking to prevent OTB from
booking Ryanair fights for OTB customers, and/or degrading the customer experience where OTB succeeds in doing so. In acting in this way, OTB believes that Ryanair has been seeking to damage it in the eyes of consumers and starve it of cash at a time when, as Ryanair is well aware, OTB’s operations have been substantially reduced by the Covid-19 pandemic. The Defence Ryanair defends the claim. Due to the jurisdictional challenge referred to above, it has not yet fled a Defence in the English proceedings. However, it is anticipated that it will do so on the basis that its actions are justifed and are not in fact intended to be anti-competitive. Further, it is said, the actions of OTB in booking fights on behalf of its customers are a breach of Ryanair’s standard terms and conditions, which explicitly forbid agents from doing so. This is part of a concerted efort by Ryanair to market fights to potential passengers directly rather than via agents, partly in order to render the customer experience a more straightforward one, and also so that the airline rather than an agent has the opportunity to market additional holiday components and add ons. Ryanair contends that this is a legitimate business concern and that its actions are a proportionate means of achieving it.
EU Competition Law According to the European Parliament : 8 “The main objective of the EU competition rules is to enable the proper functioning of the EU’s internal market as a key driver for the well-being of EU citizens, businesses and society as a whole. To this end, the Treaty on the Functioning of the European Union (TFEU) contains rules that aim to prevent restrictions on and distortions of competition in the internal market. More specifcally, it does so by prohibiting anticompetitive agreements between undertakings and abuse of market position by dominant undertakings, which could adversely afect trade between Member States...” This objective is achieved by way of a number of provisions. The anticompetitive dangers inherent in mergers are dealt with by reference to the Merger Regulation Council Regulation (EC) No 139/2004 (‘the Merger Regulation) and its implementing rules (Commission Regulation (EC) No 802/2004). More importantly, in this context, Articles 101 to 109 of the Treaty on the Functioning of the European Union and Protocol 27 on the internal market and competition make it clear that a system of fair competition forms an integral part of the internal market, as set out in Article 3(3) of the Treaty on European Union. The fundamental objective of EU competition rules is to ensure the proper functioning of the internal market. Currently there is a debate taking place internationally as to the rationale underpinning competition law: whether it is desirable to allow commercial entities to compete freely in order to maximise their economic efectiveness, or in order to safeguard consumers’ ability to choose between providers. The EU’s Competton policy | Fact Sheets on the European Union | European Parliament (europa.eu) 8
policy statement suggests that the former is the more important of the two potential objectives, but that both are of signifcance: “Efective competition enables businesses to compete on equal terms across Member States, while putting them under pressure to strive continuously to ofer the best possible products at the best possible prices for consumers. This in turn drives innovation and long-term economic growth. Competition policy is thuds a key instrument for achieving a free and dynamic internal market and promoting general economic welfare.” However, although this is the focus of policymakers in the European Parliament, the Court of Justice of the European Union has emphasised its remit in consumer protection, consistently interpreting EU legislation in a purposive way to maximise such protection across the bloc. Moreover, the Covid-19 pandemic has posed particular challenges to businesses, consumers and the economy as a whole, requiring a range of measures in the feld of competition to enable governments (and the EU itself) to mount an adequate response to these challenges. A number of initiatives aimed at reinforcing EU strategic autonomy in a global context are planned, such as the proposed instrument to address potential distortive efects of foreign subsidies in the single market and 9 the proposed EU carbon border adjustment mechanism . In the 10 meantime, the EU seeks to ensure proper competition between commercial entities to the protection of both the consumer and the marketplace by way of two main mechanisms (ignoring for present purposes the provisions as to state aid and merger, which fall outside consideration of this topic). Procedure File: 2021/0114(COD) | Legislatve Observatory | European Parliament (europa.eu) 9 Procedure File: 2021/0214(COD) | Legislatve Observatory | European Parliament (europa.eu) 10
(1) The comprehensive ban on anti-competitive agreements (Article 101 TFEU) Article 101 TFEU reads: “(1) The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may afect trade between Member States and which have as their object or efect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fx purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. (2) Any agreements or decisions prohibited pursuant to this Article shall be automatically void. (3) The provisions of paragraph 1 may, however, be declared inapplicable in the case of: • any agreement or category of agreements between undertakings,
• any decision or category of decisions by associations of undertakings, • any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting beneft, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) aford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. The thinking behind this provision is clear. If, instead of competing with each other, companies agreed to reduce competition, this would distort the level playing feld and thus in turn cause harm to consumers and other businesses. This is why all agreements between undertakings which have as their object or efect a distortion of competition and which may afect trade between Member States are prohibited (paragraph 1) and automatically void (paragraph 2). This includes, for example, explicit agreements (such as those of cartels) and concerted practices for fxing prices or limiting production output, or dividing the market among companies (also called territorial protection clauses). Those types of agreement are always considered harmful to competition and are thus prohibited without exception. On the other hand, other types of agreements may be exempted, provided that they contribute to improving the production or distribution of goods or to promoting technical or economic progress. For example, agreements on cost or risk sharing between companies, or on accelerating innovation through cooperation in research and
development could bring signifcant economic benefts. The conditions for granting such an exemption are that consumers are allowed a fair share of the resulting beneft and that the agreement does not impose unnecessary restrictions or aim to eliminate competition for a substantial part of the products concerned (paragraph 3). Rather than such exemptions being granted on a case-by-case basis, they are most commonly governed by the Block Exemption Regulations. These regulations cover groups of similar specifc agreements, which usually have a comparable impact on competition. The Commission is currently reviewing the Vertical Block Exemption Regulation, as well as the two Horizontal Block Exemption Regulations, together with the relevant guidelines. The aim of the review is to determine whether these regulations still take proper account of market developments and are still ft for purpose. Moreover, certain agreements are not regarded as infringements if they are of minor importance and have little impact on the market (the de minimis principle), even if they do not fulfl the conditions for exemption under Article 101(3) TFEU (so-called agreements of minor importance). Such agreements are often seen as useful for cooperation between small and medium-sized enterprises. However, agreements which have the restriction of competition as their ‘object’ cannot be regarded as being of minor importance. (2) The prohibition of abuse of a dominant position (Article 102 TFEU) Article 102 TFEU reads: “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as
incompatible with the internal market in so far as it may afect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.” If a company that holds a position of strength (dominance) in a particular market were to abuse that position (for example by charging customers excessively high prices), it would cause harm to consumers and competitors alike. This is why such behaviour is prohibited under EU competition law. One of the most prominent cases of abuse of dominant position culminated in the 2004 Microsoft Decision, Case COMP/C-3/37.792. The Commission found that Microsoft had abused its dominant position in PC operating systems by withholding critical interoperability information from its competitors, meaning that providers of rival operating systems were unable to compete efectively. A dominant position is ‘a position of economic strength enjoyed by an undertaking which enables it to prevent efective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and
ultimately of its consumers’ . Dominant positions are assessed in 11 relation to the internal market as a whole, or at least a substantial part of it. How much of the market is taken into account will depend on the nature of the product, the availability of alternative products, and consumers’ behaviour and readiness to switch to alternative products. The Commission is currently preparing a comprehensive review of its approach to defning the concept of relevant market. A dominant position is not in itself an infringement of EU competition law, and the holders of such positions are allowed to compete on merit, like any other company. However, a position of dominance confers on undertaking a special responsibility to ensure that its conduct does not distort competition. This means that the same conduct, if engaged in by a non-dominant frm, would not necessarily be illegal. Examples of behaviour that would amount to abuse of dominant position include setting prices at below cost level (predation), charging excessive prices, tying and bundling, and refusal to deal with certain counterparts. Article 102 TFEU itself provides a non-exhaustive list of examples of abusive practice. Comment The ongoing battle between Ryanair and online travel agents is an interesting one for all concerned with the travel industry. It is not too much to say that it may be existential as far as some smaller agents are concerned; and herein lies the difculty for Ryanair. Although the airline is trying to position itself as a victim of agents’ attempts to steal its business and, in doing so, provide its customers with a poor purchasing United Brands Company and United Brands Continentaal BV v Commission of the 11 European Communities, Case C-27/76.
and fying experience, the only reason the customer is currently sufering any defcit is Ryanair’s own attempts to protect its commercial interests. Its long campaign to prevent any entity other than itself from selling its fights does look, superfcially at least, like an abuse of its dominant market position, for which its reasons appear weak. In particular, limiting consumer choice and implementing policies which have the direct result of adversely afecting consumers does not appear compatible with Article 102. Interestingly, Steve Endacott, a well known British entrepreneur and consultant in the travel industry, has applauded the action brought by OTB in the courts of England and Wales , 12 commenting: “Ryanair has always taken an extreme stance, refusing to provide booking APIs and actively trying to blook screen-scrapers. Having failed to achieve this, they have now switched to disrupting OTA customer processes by preventing their customers from using its myRyanair online check-in tools and sending OTA customers emails suggesting the mark-up fight and baggage costs they have paid are above those charged by the airline directly. During Covid-19, Ryanair took its anti-trade stance further, putting OTA bookings at the back of the queue for refunds. Ryanair knew the package regulations and the ability of customers to hit OTAs with credit card recharges would force them to refund, even if they had not been repaid by Ryanair, protecting Ryanair from a direct customer backlash for late repayment and allowing them to hold on to hundreds of millions in refunds that were due. For OTB alone this represented a £48.7 million cashfow hit. Comment: Will On the Beach suing Ryanair create an avalanche of claims? | Travel Weekly 12
Many other travel companies, such as Loveholidays, incurred extensive brand damage because their trust funds simply did not have enough money in them to refund customers if Ryanair did not refund them. Hence, my view is that although OTB is fghting an independent battle against Ryanair, success will lead to an avalanche of damages claims. Customers buying a package holiday primarily buy based on the holiday destination and hotel ofered, usually considering the fight as a ‘bus service’ purchased based on a combination of lowest price and best fight times. OTAs ofer the widest range of options because, unlike low-cost carriers’ internal holiday companies, they ofer all airlines and the ability to mix and match inbound/outbounds between diferent airlines. In doing so, they provide a range and value that customers beneft from and is something the courts are likely to seek to protect. Therefore, I think our judicial system will fnd in favour of OTB and conclude that Ryanair is indeed abusing a dominant market position, even though the UK government – via either the CAA or CMA – has failed to bring them inline to date. Whatever happens, the trade should be applauding OTB for fghting the case and highlighting an issue that has afected hundreds of UK travel companies and continues to do so.” Of course, only time will tell whether Mr Endacott is correct in his prediction that the English courts are likely to side with Ryanair; but the battle lines are now drawn in what promises to be an extremely informative legal saga which will shape industry practice in future, not just in England and Wales, but throughout Europe as well.
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