Competition law is of great importance in the aviation market.

On 9 February, a fell Verdict in the Supreme Court of Iceland, where it was confirmed that Icelandair had abused its dominant market position on the flight route between Keflavik and Copenhagen. The company was fined 80 million krónur. This concerned the promotion and sale of so-called 'Netsmells', which were available to Icelandair's customers in 2004. The District Court had previously upheld the competition authorities' finding of an infringement by Icelandair but quashed the fines.

The Supreme Court's judgment includes a precedent that is important for smaller and new competitors in passenger aviation to and from Iceland. It is a confirmation that a dominant player in passenger aviation must be careful not to restrict market access through the promotion and pricing of airfares.

Furthermore, it is important that the judgment confirms the principle that fines should be imposed for breaches of the prohibition provisions of competition law, including the prohibition on the abuse of a dominant position. The Supreme Court also took into account that Icelandair had previously breached the same prohibition provision.

1. Competition authorities have repeatedly intervened in anti-competitive situations in airline markets.

There is no doubt that the state of competition in the aviation market is of great importance to business and the public in this country. The aforementioned judgment is a good opportunity to outline some instances where competition authorities have intervened to remove barriers to competition in aviation markets in recent years.

1. By decision No. 22/2003 Competition authorities concluded that Icelandair had abused its dominant market position when the company responded to the entry of Iceland Express into the market. It was concluded that Icelandair's undercutting on routes that Iceland Express was starting to fly was unlawful. The Competition Appeals Board confirmed Icelandair's infringement (dec. No. 17-18/2003).
2. By decision No. 11/2007 The Competition Authority fined Icelandair ehf. 190 million króna for abusing its dominant market position in scheduled flights on the routes between Keflavik and Copenhagen on the one hand, and Keflavik and London on the other. The case concluded last week with the Supreme Court judgment referred to at the beginning.
3. In 2003, the competition authorities interim decision concerning a complaint by Iceland Express against VISA Ísland-Greiðslumiðlun hf. where the latter company was found to have abused its dominant market position towards Iceland Express by requiring a special guarantee for credit card transactions with the company, thereby preventing it from launching competition in aviation.
4. In April 2006 to sect The Competition Authority fined the Icelandair Ground Handling service at Keflavik Airport (IGS), a subsidiary of Icelandair, 80 million krónur for abusing its dominant market position in the handling of passenger aircraft. The company breached competition law through 10 exclusive purchasing agreements with airlines that land at Keflavik Airport and by making a competitively restrictive offer to the airline LTU. These actions were directed against a smaller competitor in aircraft handling, Vallarvinir. This decision followed interim decision in the year 2005.

   The Competition Appeals Board upheld the infringements but reduced the fines to 60 million krónur. The case was brought before the Reykjavík District Court, which upheld the appeal board's ruling. The Supreme Court also upheld the infringements but reduced the fines to 40 million króna.

5. This was not the first time that the competition authorities had intervened against competitive barriers directed at Vallarvini, as in 2000, instructions were issued to Leif Ericson Airport Ltd. to negotiate with the ground handling company Vallarvinir regarding the necessary facilities for check-in and passenger services, as the airport had previously refused to do.
6. By decision No. 4/2011 The Competition Authority concluded that the handling of flight rights by the Icelandic Civil Aviation Authority distorted competition in scheduled flights to and from the country. Conditions set by the Civil Aviation Authority prevented Astraeus (the then-operating airline for Iceland Express) from offering scheduled flights between Keflavik and Winnipeg, Canada. The Competition Authority issued a binding order to the Civil Aviation Authority to change its procedures for granting flight rights, with the aim of increasing competition in flights to and from Iceland.
7. With interim decision In 2011, the Competition Authority ordered the aircraft handling company IGS ehf. to enter into a contract with Cargo Express ehf. for cargo handling, as the company had previously refused to do so.
8. The Competition Authority has on several occasions examined the competitive conditions in air freight. Thus, the Authority recommended, among other things, that Bláfugl ehf. be separated from the Icelandair Group. That recommendation was implemented, see decision. No. 8/2011.

2. The measures have been successful

Currently, two airlines offer year-round flights to and from Iceland, in addition to which a third airline has announced operations. Further airlines offer seasonal services. One reason for this is that airlines have a choice of handling agents, and the services provided by the aviation authorities are gradually improving. This represents a significant change in a few years, from a situation where a single airline held sway and enjoyed various forms of government support.

This change is largely thanks to those who saw an opportunity to offer new options and had the courage to implement them. It is equally clear that these attempts would in many cases have failed if the Competition Act had not been in force and enforced.

However, much remains to be done. It should be noted that in the report of the Competition Authority No. 2/2008, Robust development – The opening of markets and the promotion of business activity, which includes a special focus on aviation markets. Various barriers to entry into these markets are identified, along with ways to remove them. While some progress has been made in this area, other issues remain. It is expected that the Competition Authority will take further action in this regard.

3. Competition law protects competition, but not always individual competitors.

The Supreme Court judgment mentioned at the beginning was delivered exactly eight years after Iceland Express complained about Icelandair's pricing. The competition authorities concluded the case in 2007, three years after the complaint was made. The case has therefore been before the courts for around five years, where various issues concerning its substance and handling have been tested. The case was tried twice in the district court, but on the first occasion the Supreme Court quashed the district court's judgment.

The handling of the case is therefore a good example of how fiercely competition law cases are often contested and how complex they can be.

This lengthy procedure also brings to mind that the decisions of competition authorities do not always fully benefit the complainant themselves, although, thankfully, there are numerous examples of them having prevented competitors from being driven out of the market.

It is understandable that a competitor who complains to the competition authorities wants to see the matter resolved quickly. The reality, however, is that competition law and its enforcement are not aimed at saving companies from all forms of harm caused by barriers to competition, but rather at stopping infringements and creating a better competitive environment for the future. to the benefit of the economy and the public.

On the other hand, a final ruling in a competition case can give competitors grounds to claim damages from the company that breached competition law and caused them harm. There are several examples of this in Iceland. Companies and consumers have sought damages from the oil companies for illegal collusion that was exposed by the competition authorities. More cases of a similar nature have been under consideration by parties who believe they have been wronged.

Páll Gunnar Pálsson
Director-General of the Competition Authority