188 COMPETITION LAW IN TOURISM entry: “When entry barriers are low, the merging parties are more likely to be constrained by entry. Conversely, when entry barriers are high, price increases by the merging firms would not be significantly constrained by entry”35. The caselaw stemming for the EU Commission and Courts has been relatively clear about this structural-based approach of competition. 4.1. Potential Competition and the Theory of Contestable Markets Beyond the assessment of markets shares and actual competition, the EU Commission evaluates whether potential competition would exercise a sufficient competitive constraint over the merged entity36. The legal reasoning on potential competition and market entry is particularly interesting as regards the economic theory of contestable market, a theory constructed on the assumption that potential competitors are able to exercise a competitive constraint through the threat of entry. The contestable markets hypothesis must be supported by the evidence that any potential competitor would most probably and effectively enter a relevant market37. The EU Commission considers that, to a certain extent, airline markets could respond to the threat of entry in a competition mechanism that could be close to the theory of contestable markets, it indeed stated that “the General Court implies that potential competition leads to lower fares”38. The entry by a carrier with a base at the same airport as the competitor or a base at the other end of the route is more likely that a new entry by a carrier without any base at both ends of a route. Moreover, the EU Commission does not dismiss the possibility that active airlines with a base at the other end of the route would, in theory, be able to constrain the merged entity. For instance, in British Airways/Iberia (2010), the EU Commission stated that “despite current capacity limitations […] it is […] not excluded that further players already active at one end of the route might enter the route”. This assessment was underlined by the fact that entry had recently effectively occurred on the London-Gatwick/Madrid 35 Point 70. 36 See, for instance, Olympic/Aegean Airlines (2011), paragraphs 1470-1502 and Ryanair/Aer Lingus (2007), paragraphs 498-540. 37 The EU Commission will receive questionnaires and surveys reflecting the views of potential new entrants. This approach enables the competition authority to have factual feedback about the state of a specific market and competitors. However, even though these surveys give an interesting insight, the opinion of a few potential competitors may not be representative of the majority of answers. 38 Aegean/Olympic (2011) paragraph 1480 about the interpretation of the Case EU General Court T-342/07 Ryanair Holdings v Commission (2010]) ECR, paragraph 162.
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