Competition Law in Tourism

IS THE AIRLINE INDUSTRY A NATURAL MONOPOLY 191 jurisdictions, as features of the market, giving the incumbent firms an economic, commercial or financial advantage over potential competitors, likely to deter potential new entrants from exercising a competitive constraint on the behaviour of the established company45. If there is clear evidence that any entry will be defeated, then the EU Commission would instead tend to adopt the view of the barriers to entry assumption and mutual restraint hypothesis. In Ryanair/Aer Lingus III, the view of the EU Commission based on these questionnaires and the market analysis over the past years (entries and exits) was that a dominant merged entity at Dublin airport would itself create a barrier to entry that would defeat any sustainable entry: “The views expressed by competitors during the market investigation show that a majority of the respondents having expressed an opinion considers that if the Transaction took place, the combined market position of Ryanair and Aer Lingus at Irish airports may act as a barrier to entry […] The above shows that there have only been limited entry events on routes subject to this Decision, especially by scheduled airlines other than the Parties. Moreover, the limited entry events by scheduled carriers were often followed shortly thereafter by an exit, thus showing that many of these entries were not sustainable”46. The assessment of the likelihood of entry by a new carrier will generally tend to be low in the presence of barriers to entry. Entry must be presumed by some form of actual evidence that a carrier would be able to compete effectively despite the existence of barriers to entry. Otherwise, the assumption will remain that mutual restraint will lead to the likelihood that market dominance, combined with barriers to entry, will discourage competitors from entering the market. The “fear of retaliation” was identified as an essential barrier to entry by the EU Commission, one clearly linked with the hypothesis of mutual restraint. In Ryanair/Aer Lingus III (2013), the EU Commission feedback from competitors made it clear that Ryanair was perceived as a very aggressive competitor and that 45 Case T-282/02 Cementbouw Handel & Industrie v Commission [2006] ECR II-319, paragraph 219: Barriers to entry are “likely expose potential competitors of the established undertakings to risks and costs sufficiently high to deter them from entering the market within a reasonable time or to make it particularly difficult for them to enter the market, thus depriving them of the capacity to exercise a competitive constraint on the conduct of the established undertakings”. 46 Para 656.

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