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Press releases 2002 -

Airline alliance could be good for consumers

OFT consults on proposed exemption from competition law

PN 48/02      9 August 2002

An airline alliance between British Midland and United Airlines could provide benefits to consumers that would outweigh possible anti-competitive effects, according to a provisional finding by the OFT. The OFT's proposal is now open for full consultation before a final decision is made.

The agreement between British Midland Airways Ltd (trading as bmi british midland) and the US carrier United Airlines would cover key areas such as route and schedule co-ordination as well as joint marketing, revenue sharing and code sharing.

The OFT considers that, if implemented, the agreement would infringe Article 81 (1) of the EC Treaty, which prohibits agreements between undertakings that would prevent, restrict or distort competition. However the OFT is proposing to grant an individual exemption under Article 81 (3).

The OFT expects the alliance to create benefits for consumers including new improved connecting and non-stop services.

Deadline for consultation is 20 September 2002.

NOTES

1. British Midland and United Airlines notified their proposed Alliance Expansion Agreement (the Agreement) to the OFT under the EC Competition Law (Articles 84 and 85) Enforcement Regulations 2001. The agreement will not be implemented until the current restrictions preventing British Midland operating transatlantic services out of Heathrow are lifted. Details of the notification can be found on the public register.

2. The Enforcement Regulations provide for enforcement of Articles 81 and 82 of the EC Treaty in cases involving air transport services between EC Member States and non-Member States or in respect of international maritime tramp vessel services. For these cases the UK has a duty to rule on whether a particular case is compatible with Articles 81 and 82.

3. Article 81 prohibits agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition within the common market and which may affect trade between Member States. However there is provision to grant an individual exemption from the prohibition under Article 81 (3) to an agreement that contributes to improving production or distribution, or to promoting technical or economic progress, while allowing consumers a fair share of the benefit. However the agreement must also not contain restrictions that are not indispensable to the attainment of those objectives and must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products concerned. An agreement must be notified to receive an individual exemption.

4. Download the consultation document in pdf format (228 kb).  You can also download the annexe in pdf format (995 kb).  Please note these files may take a few minutes to download. 

5. Interested third parties who wish to comment on the proposed decision to grant an exemption to the British Midland/United Airlines agreement should write to Claire Leek at the OFT, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX or send an e-mail to claire.leek@oft.gsi.gov.uk, quoting reference CP/1535-01. Any person making written representations should identify any information they consider to be confidential in a separate annexe clearly marked, and should provide a written explanation as to why the disclosure of the information would, or might, significantly harm the interests of the undertaking or individual.

6. In this press release the functions of the Director General of Fair Trading (DGFT) are for simplicity described as the functions of 'the OFT'. The Enterprise Bill proposes to replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.




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