British Airways fined for unlawful calculation of agents’ commissions

The Commission has adopted a decision pursuant to Article 82 EC imposing a EUR 6.8 million fine on British Airways plc (BA) for the abuse of its dominant position. The infringement consisted in two parts: (a) loyalty discounts granted to the travel agents from whom BA purchased air travel agency services in the UK and (b) abusive discrimination between travel agents between 1992 and the present day.

The system was operated as follows: under its marketing agreements (“MAs”), BA provided travel agents with “performance reward” and “bonuses” supplementing their basic commission. These payments were based on the extent to which a travel agent met or increased the value of its sales of BA tickets year on year. The higher the growth, the larger the cash payment. Moreover, travel agents who took part in the MA commission scheme were eligible to receive cash sums from “training support funds” and “business development funds” (“TSBD funds”), respectively to attend BA training courses and to promote and market projects of mutual interest to BA and the travel agents.

Exclusionary rebates The Commission recalled that exclusionary rebate schemes have consistently been condemned as a serious abuse of dominant position. The discount scheme operated by BA was considered to be very similar to that condemned by the Court in the Michelin case (Case C-322/81, [1983] ECR 3461), even if it did not present all the features of the scheme condemned in Hoffman LaRoche (Case C-85/76, [1979] ECR 541).

The Commission highlighted that the crucial point was that discounts were applied by BA in return for loyalty rather than efficiency based on volumes of sale and/or levels of service provided.

The Commission considered that it is reasonable to assume that this unlawful behaviour had allowed BA to maintain a 40% market share in the UK markets for air transport, despite liberalisation in this sector. BA’s commission scheme was a means to fend off competition from new entrants in the face of the removal of regulatory barriers. Moreover, it was clear that the system had the object and effect of excluding BA’s competitors from the UK markets for air transport.

Effectively, travel agents were encouraged to remain loyal to BA rather than to sell their services to BA’s competitors. The TSBD funds were not considered abusive in themselves, but the Commission condemned the system as it was used as an extra incentive to take part in the MAs, thus reinforcing their effect.

Rather than harming certain competitors who cannot compete with BA on merit, the rebates harmed any potential new entrants, and competition as a whole was put in jeopardy, to the detriment of consumers. The fact that some new entrants had still managed to gain market share from BA was not considered to indicate that the schemes had had no effect on competition. Discrimination The Commission considered that through its rebate scheme, BA was applying dissimilar conditions to equivalent transactions. Indeed, two travel agents handling the same number of BA tickets and providing exactly the same level of service to BA received a different commission rate depending on their sales of BA tickets in the previous year. As a result, some of them were placed at a competitive disadvantage. (OJ L30, 1/2/00).