## Facts

- British Airways plc (BA) set commission arrangements with U.K. travel agents accredited to sell airline tickets.
- Agents received a basic commission on BA ticket sales plus additional bonuses under “marketing agreements” and later “performance reward schemes.”
- Bonuses depended on meeting individually set sales-growth targets for BA tickets compared with a reference period.
- If an agent met its target, the higher bonus rate applied retroactively to all BA tickets sold in the period, not just incremental sales.
- The Commission found BA dominant as a purchaser of travel agents’ distribution/marketing services in the United Kingdom.
- The Commission concluded the bonus schemes incentivized agents to prioritize BA over rival airlines and produced different effective remuneration for agents providing equivalent services.
- The Commission adopted a decision finding an abuse of dominant position under Article 82 EC (now Article 102 TFEU) and imposed a £6.8 million fine.
- BA brought an annulment action challenging competence, market definition, dominance, abuse findings, and the fine.

## Issues

1. Whether the Commission had competence to apply Article 82 EC to BA’s commission and bonus schemes involving travel agents, despite air-transport-specific regulation.
2. Whether the relevant market could be defined as travel agents’ services provided to airlines, with the United Kingdom as the geographic market, and whether BA was dominant on that market as a buyer.
3. Whether BA’s target-based, retroactive bonus schemes constituted an abuse by foreclosing rivals and/or discriminating between equivalent transactions without objective justification.
4. Whether Article 82 EC applied where conduct on the travel-agent-services market affected competition in the downstream air transport market, and what link between markets was required.
5. Whether the fine was proportionate given the gravity and duration of the infringement.

## Decision

- The General Court dismissed BA’s action and upheld the Commission decision in full.
- The court held the Commission was competent to apply Article 82 EC because the conduct concerned purchase of distribution/marketing services, not conduct directly relating to the provision of air transport services.
- The court upheld the product market as travel agents’ services to airlines and the geographic market as the United Kingdom.
- The court affirmed that dominance may exist on the buying side and found BA dominant as a purchaser of those services in the U.K.
- The court sustained the finding of abuse: the retroactive, target-based bonuses were capable of excluding rivals and the schemes also produced discriminatory remuneration between agents performing equivalent services.
- The court upheld the fine, finding no disproportionality or manifest error.

## Legal Principles

- Competition-law competence may turn on whether conduct concerns the provision of transport services or the purchase of separate distribution/marketing services; the latter may fall under general competition rules.
- The relevant market is defined by interchangeability/substitutability; intermediary distribution services can constitute a distinct product market from the underlying service sold to end customers.
- Dominance is not limited to sellers; an undertaking may hold a dominant position in its capacity as a buyer if it can act to an appreciable extent independently of counterparties and competitors.
- “Abuse” is an objective concept covering conduct by a dominant undertaking that is likely to weaken competition by methods departing from normal competition, including mechanisms that induce loyalty or raise rivals’ costs.
- Target-based, retroactive bonus schemes can be abusive where their structure makes diversion of sales to rivals materially costly and they are capable of producing foreclosure effects without requiring proof of actual market elimination.
- Applying unequal conditions to equivalent transactions can constitute abuse where differences in remuneration are not objectively justified and distort competition among trading partners.
- Article 82 EC may apply where conduct on the dominated market is liable to affect competition on a neighboring market, provided there is a sufficient link between the markets.
- A dominant undertaking bears a special responsibility not to impair undistorted competition; efficiency claims require substantiated, proportionate justification.
- The Commission has discretion in setting fines; judicial review focuses on legal error, manifest error, and proportionality relative to gravity and duration.

## Conclusion

The General Court upheld a finding that BA, dominant as a purchaser of U.K. travel agents’ services, abused that position through retroactive, target-based commission bonuses that were capable of foreclosing rival airlines and that discriminated among agents providing equivalent services, and it sustained the Commission’s fine as proportionate.


British Airways plc v. Commission, Case T-219/99, 2003 E.C.R. II-5917 (Gen. Ct. 2003)