28 Apr, 2016

Airline Ticket Pricing and Distribution: The EU Code of Conduct Must Be Respected

The market for the distribution of airline tickets has recently come under the examination of the European Commission (the “Commission”). Upon receiving the formal complaint from the European Technology and Travel Services Association (the “ETTSA”)1, the Commission has sent questionnaires to carriers, travel agents, online reservation sites and global distribution systems asking for the information on exact contract terms and conditions between airlines, travel agents and computerized reservations systems. The main issue that should be determined is whether airlines are impacting customers to book tickets on their own websites rather than using travel agencies and other available computer reservation systems (i.e. metasearch platforms such as Skyscanner, Priceline, Expedia, etc.).

The said course of events was preceded by the new commercial strategy which Lufthansa Group (parent company of Lufthansa, Austrian Airlines, Brussels Airlines and Swiss Airline) launched in June 2015. The commercial strategy, inter alia, introduced a new surcharge, the “Distribution Cost Charge” of 16 euros for every ticket which was not sold on Lufthansa Group websites, but purchased via alternative booking sites using Global Distribution Systems.2 Following that, ETTSA, which represents a Global Distribution Systems, filed a formal complaint with the Commission (Directorate General of Mobility and Transport) against airlines from Lufthansa Group claiming that the members of the Group have breached provisions of the European Union’s Code of Conduct on computerized reservation systems3 by imposing surcharges of 16 euros on customers for airline tickets which were not purchased from their own web sites. Allegedly, such behavior constitutes discrimination prohibited by the Code of Conduct under which is stated that carriers must not discriminate between computer reservation systems and are obliged to secure non-biased presentation of travel options.4

There were two more similar complaints that were filed, in July and August 2015 respectively, both triggered by the mentioned commercial strategy. One complaint was filed with the Directorate General of Mobility and Transport by a group representing national associations of travel agents and tour operators in Europe, while the other was lodged by a German association of travel agents with EU competition chief.

In order to establish whether the provisions of Code of Conduct were breached, the Commission is now seeking information by the sent questionnaires from involved parties. The questions mainly concentrate on provisions of contracts between travel agents, global distribution systems and online travel services in order to enable the Commission to assess whether those contracts contain terms that potentially lead to information sharing and price fixing.

If the Commission finds that Lufthansa Group’s airlines have infringed the Code of Conduct, it may fine Lufthansa Group up to 10 percent of its annual revenue, which amounted to €32 billion last year.5 Nonetheless, before taking such decision, the Commission has to open formal investigation issuing to Lufthansa Group statement of objections and giving it an opportunity to submit its views in writing and, if it so requests, at an oral hearing.6

 

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ETTSA was launched in 2009 to represent and promote the interests of travel distributors and Global Distribution Systems. Working with industry, policymakers, opinion formers, consumer groups and other relevant European stakeholders, the Brussels – based association encourages and supports fair competition and consumer choice in the travel distribution chain. For more information see http://www.ettsa.eu/

2 Global distribution system refers to the worldwide computerized booking network used for reserving airline seats, hotel rooms, rental cars, and other travel related items by travel agents, online reservation sites, and large corporations.
REGULATION (EC) No 80/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 January 2009 on a Code of Conduct for computerized reservation systems and repealing Council Regulation (EEC) No 2299/89, available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0080&from=EN

See Art. 10 paragraph 4 of REGULATION (EC) No 80/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 January 2009 on a Code of Conduct for computerized reservation systems and repealing Council Regulation (EEC) No 2299/89, available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0080&from=EN

Art. 15 of REGULATION (EC) No 80/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 January 2009 on a Code of Conduct for computerized reservation systems and repealing Council Regulation (EEC) No 2299/89, available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0080&from=EN; http://investor-relations.lufthansagroup.com/fileadmin/downloads/en/financial-reports/annual-reports/LH-AR-2015-e.pdf

Article 16 paragraph 1 of REGULATION (EC) No 80/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 January 2009 on a Code of Conduct for computerized reservation systems and repealing Council Regulation (EEC) No 2299/89, available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0080&from=EN

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