Brussels, 18 July 2001
Commission fines SAS and Maersk Air for market-sharing agreement
The European Commission has decided to fine Scandinavian airlines SAS and Maersk Air € 39.375 million and € 13.125 million respectively for operating a secret agreement that led to the monopolisation by SAS of the Copenhagen-Stockholm route to the detriment of over one million passengers that use that major route every year, as well as to the sharing out of other routes to and from Denmark.
SAS (Scandinavian Airlines System) is a consortium partly owned by the Swedish, Danish and Norwegian states. Maersk Air A/S is a Danish company owned by the A.P. MØller group. Together, they are the two main airlines that operate flights to and from Denmark, the country most concerned by the investigation.
The two companies concluded a cooperation agreement in October 1998 which they notified to the European Commission for regulatory approval. The notification, however, focused on code-sharing provisions, under which SAS could market Maersk Air's flights as SAS flights, and the extension of SAS's frequent flyer programme to Maersk's clients.
The airlines carefully ommitted what amounts to being a broad market-sharing agreement, the most visible part of which led to the withdrawal by Maersk Air from the Copenhagen-Stockholm and SAS's exit from the Copenhagen-Venice and Frankfurt-Billund routes. Billund is Denmark's second airport in the western province of Jutland.
Suspicious that the cooperation agreement was of a greater and restrictive scope, the Commission carried out inspections at the companies' headquarters in June 2000, where it gathered evidence that SAS and Maersk Air had agreed to an overall non-compete clause, according to which Maersk Air would not launch any new international routes from Copenhagen without approval from SAS. Conversely, the parties agreed that SAS would not operate on Maersk Air's routes out of Jutland's Billund. The parties also agreed to respect the share-out of the domestic routes.
In addition to the overall non-compete clause, SAS and Maersk Air agreed specifically that:
This secret agreement between SAS and Maersk Air is a very serious violation of European Union competition law and very damaging for Scandinavian passengers which were left with reduced choice or no choice at all, and potentially higher prices. Before the agreement, the Copenhagen-Stockholm route was operated by SAS, Maersk Air and Finnair. Maersk's withdrawal from the route caused the exit of Finnair, as the two airlines previously had a code-sharing agreement. Currently, SAS has close to 100 percent of the traffic between the Danish and the Swedish capitals.
Commenting on the case, Competition Commissioner Mario Monti said:
"This is a clear case of two airlines sharing markets illegally to the detriment of passengers. The Commission is determined to ensure that the liberalisation achieved in the European air transport in the last decade is not undermined by anti-competitive agreements. I trust that the fines imposed to SAS and to Maersk Air will serve as a deterrent to the two airlines concerned and to others."
The antitrust violation at stake is a very serious one because of its nature, the size of the relevant geographic market and the actual impact on the market.
The companies were also fully aware that the agreement was illegal as they deliberately tried to conceal it. A meeting of the project managers' group of 26 June 1998 "ordered", in a written record, "to maintain strict confidentiality and not to keep documents in the office", while another record of a meeting of the same managers' group two months later stated that "The parts of the documents that infringe art.85(1)…(will have) to be put in escrow in the offices of the lawyers from both sides".
The Commission established that the infringement lasted between September 5, 1998, which is the date of one of the documents that recorded the parties' agreement, and 15 February 2001, when the parties regained their freedom to compete following the receipt of the Commission's statement of objections.
To establish the amount of the fines, the Commission took into account, among other elements, the difference between the size of the two airlines, the fact that the agreement in effect extended the market power of SAS, the need to set the fines at a level which ensures that they have a sufficiently deterrent effect, and the degree to which the parties cooperated with the Commission after the on-site inspections.