10 Colum. J. Eur. L. 105 (2003)

Jurian Langer. M.A. (Groningen) LL.M (London), M.LE (Hamburg/Rotterdam), Ph.D. researcher at the European University Institute, Florence, Italy.

Oligopolies are markets where only a few large suppliers, none of which are individually dominant, account for most of the supplies. Oligopolies can be highly competitive. Under certain circumstances, however, these markets are prone to little or no competition. The danger exists that, due to the characteristics of the market, the level of market prices and output will be similar to those that a monopolist would impose. Since Article 81 TEC and Article 82 TEC are of limited use to control the impact of oligopolies on competition, ex ante merger control is generally favored to prevent the emergence of oligopolistic supply structures.’ The European Community rules on merger control provide that a merger can be prohibited if it “creates or strengthens a dominant position” which significantly impedes competition. Although it has been firmly established that ‘joint dominance’ is within the scope of Community merger control, what precisely constitutes joint dominance has been shrouded in uncertainty.

The Airtours case is a dramatic watershed in the joint dominance saga. In September 1999, the European Commission (hereafter the “Commission”) blocked the hostile acquisition of First Choice by Airtours because the transaction would have created a three-firm dominant position in the market for short-haul package holidays in the UK. The Commission decision prompted a remarkable amount of attention and alarmed critics in legal and economic circles. In June 2002, the Court of First Instance (hereafter “the CFI”) annulled the Commission decision in a sharply worded ruling. The CFI not only accepted virtually all arguments submitted by Airtours, but it also delivered a stinging critique of the Commission’s reasoning and emphatically rejected its interpretation of economic theory.

The Airtours case can be seen as a landmark case under Community merger control from four perspectives. First, the case constitutes the first merger prohibition where joint dominance is applied to more than two oligopolists. Secondly, the ruling is the first case ever in which a Community Court has overruled, on review, a merger prohibition by the Commission. Thirdly and more importantly, the CFI’s ruling makes unambiguously clear that joint dominance, in line with the consensus of economic theory, involves an assessment of the risk of tacit co-ordination by the market players in the post-merger situation. Finally, the judgment was notable given that the CFI was prepared to scrutinize the Commission’s detailed analysis and fact-finding process. In essence, the judgment not merely involved a general review of the Commission decision, but reviewed the original case de novo.