EC Court Rules Against Airline Pricing Pacts

The European Court of Justice, in a landmark judgment that could help cut air fares, ruled Tuesday that nearly all pricing pacts between airlines could violate European Community free competition policy.

The ruling is expected to help the EC’s executive commission push member states and national airlines to agree to new steps toward liberalizing air transport.

At present national airlines tend to fix air fares on international routes either through multilateral or bilateral agreements, a procedure attacked by critics as restricting competition and keeping air fares artificially high.

The commission has said that air transport should be treated like any other trade or service in the 12-nation EC, and should be made to follow free competition policy. But it has never been clear how the EC’s free competition policy should be applied to air transport.

In its ruling, the Luxembourg-based court said all agreements between airlines--whether applying to domestic or international flight--could be outlawed as abusing a dominant market position under EC rules.

It also said accords between airlines on setting tariffs for flights between EC countries could be outlawed under EC regulations dealing with free competition.

EC member states agreed in 1987 on a limited liberalization of air transport. But the commission is expected to submit fresh proposals before the summer to open up routes to more carriers and increase the availability of discount fares.

The case was referred to the Court of Justice by a West German court, which is due to rule on a related issue involving a West German travel agency, Ahmed Saeed Flugreisen.

In that case, the agency was accused of unfair competition for buying cut-rate air tickets abroad to sell at lower rates than its competitors in West Germany.

A West German court will now make a final ruling on the Saeed case. But legal experts said that since the EC court had used the case as an opportunity to give a much broader ruling on air transport, it was unclear which way the ruling on the Saeed case would go.