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European Travel Agents Association File Complaint Against Lufthansa Group in DCC Battle.

August 1, 2015

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ECTAA the umbrella organization for the European Travel Agencies on July 24th 2015 filed a legal complaint to the European Commission. In this direct complaint the ECTAA group is claiming that the Lufthansa action in imposing a 16 euro fee for each booking with its DCC – Distribution Cost Charge made via the GDS directly contravenes several European Commission statutes. A full copy of the press release about their complaint can be found here.

Specifically ECTAA’s board charges that the DCC programme contravenes the European CRS Code of conduct. The full text of the regulation can be found on the European Commission Site .

ECTAA claims the following:

Following a detailed legal analysis of the Lufthansa announcement, ECTAA has decided to file a complaint with the European Commission Directorate-General for Mobility and Transport as Lufthansa’s action constitutes a breach of the EU Regulation N° 80/2009 on a Code of Conduct for GDSs.  in particular in what concerns the provisions of the articles 10.4 and 10.5 of the Regulation. Indeed, if the Lufthansa’s Agent booking platform falls within the definition of a GDS as defined in article 2.4 of the Regulation, Lufthansa as a ‘parent carrier’ must comply with parent carrier’s obligations as specified in articles 10.4 and 10.5.

Further the organization is evaluating further action under EU law:

“ECTAA and its Members are further pursuing legal investigations to see whether Lufthansa’s actions infringe European competition rules (Articles 101 and 102 of the EU Treaty).

In the first instance for their complaint against Lufthansa Group there is one clear statement in the regulation that would appear to invalidate the position of ECTAA. Namely and specifically there are questions whether Lufthansa in operating the website Lufthansa Group Agent.com would be in breach of EU regulation. Under the act’s definitions (Article 2 section 5) it states:

5. ‘system vendor’ means any entity and its affiliates which is or are responsible for the operation or marketing of a CRS;

EU CRS Code of Conduct Articles 10.4 and 10.5 which were quoted by ECTAA state:

4. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by linking the use of any specific CRS by a subscriber with the receipt of any commission or other incentive or disincentive for the sale of its transport products.

5. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by requiring the use of any specific CRS by a subscriber for sale or issue of tickets for any transport products provided either directly or indirectly by itself.

It would appear that ECTAA is trying to argue that the new airline platform is indeed a CRS as defined by the code and therefore there is discrimination going on vs the other CRS companies – namely Lufthansa Group Agent.com    is favoured against the competing platforms of Sabre, Amadeus and Travelport.  However on close examination of the CRS Code of conduct there is a clear exemption which would appear to invalidate the ECTAA claim.

Specifically Article 5 we believe exempts Lufthansa’s direct channels as follows:.

5.   This Article shall not apply to a CRS used by an air carrier, or rail-transport operator, or a group of air carriers, or of rail-transport operators, in its or their own office or offices and sales counters or on their own websites clearly identified as such.

As we can see from the attached screen shot this would seem to confirm the view that the site is clearly identified as being branded by Lufthansa.

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With regard to ECTAA’s view that Lufthansa is in breach of the main competition law of the European Commission,  the invocation of Articles 101 and 102 of TFEU. The complaint could also fall afoul of such European regulation itself.

Here is part of the text of TFEU Regulation 101  in particular one should examine the key provisions of Article 101 which states:

Article 101
(ex Article 81 TEC)

1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

As has been seen from the recent hotel price fixing allegations against Sabre’s hotel system with rate parity clauses being essentially outlawed – any attempt to force rate, fare or fee parity would appear to be in conflict with 1.(a) above. This would tend to support Lufthansa’s stated view that it would be against the law if the airline was not being able to change rates by channel and type and also to charge different prices by different channels.

However where ECTAA may have a point in that Lufthansa could be seen to be attempting to undertake behaviour which is specifically outlawed under TFEU  section 1.(b) above. Additional support for ECTAA may be the question of whether Lufthansa is trying to leverage its dominant position. Further an examination of TFEU article 102  states:
Article 102
(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Who will win?

This is going to be interesting. There is a certain sense of urgency since Lufthansa’s DCC charge goes into effect on September 1st 2015, for four members of the airline group’s legacy carriers – Lufthansa (LH), Swiss (LX), Austrian (OS) and Brussels (SN).

My opinion is that Lufthansa is on solid ground with its process and decision. Further this movement has put a significant focus for the agency community who must now face the more urgent need to build deeper relationships with their providers.

DISCLAIMER:

The opinions and analysis expressed here are of the author and the examination of the available information. I am at pains to state that I am not certified as a legal expert and all views and writings expressed here should not be regarded as formal legal opinion and therefore must not be relied on as such.

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