[wired-gov.net] OFT welcomes Competition Appeal Tribunal judgment in Ryanair/Aer Lingus merger case

OFT welcomes Competition Appeal Tribunal judgment in Ryanair/Aer Lingus merger case

The OFT yesterday welcomed judgment by the Competition Appeal Tribunal that it is ‘in-time’ to review Ryanair’s acquisition of a minority interest in Aer Lingus.

The Tribunal agreed that the OFT was unable to apply its national merger control legislation whilst appeals were ongoing in the European courts.

Had the OFT opened an investigation under the Enterprise Act 2002 while the EU appeal process was ongoing, it would have created a risk of inconsistent outcomes and conflict of jurisdiction that would have been contrary to the duty of sincere co-operation set out in Article 4 of the Treaty on European Union.

The Enterprise Act 2002 gives significant protection to UK consumers and it has been confirmed by the Court of Appeal in a previous case that in certain circumstances the acquisition of minority stakes can lead to consumer harm. The OFT wishes to ensure that it is able to review whether Ryanair’s stake in Aer Lingus damages competition and, if this may be the case, whether a detailed review by the Competition Commission is appropriate.

Sheldon Mills, Director of Mergers at the OFT, said:

‘We welcome today’s ruling by the CAT which provides important clarification of the scope of UK merger control law and its interaction with the merger control regime of the European Union. We opened an investigation into Ryanair’s minority stake in Aer Lingus because it may raise competition concerns and harm UK consumers. We commenced an investigation once we were able to do so. This has been confirmed today by the CAT.’      

NOTES

  1. Ryanair Holdings plc currently owns 29.82 per cent of Aer Lingus Group plc. Ryanair initially acquired a stake in Aer Lingus in late-2006. It mounted a public bid for the entire shareholding in Aer Lingus in October 2006. The European Commission investigated the public bid and decided to prohibit it in June 2007. The General Court ruled in July 2010 that the European Commission does not have the ability to examine or require divestment of minority shareholdings that do not confer ‘decisive influence’ for the purposes of the EC Merger Regulation – see Note 4). The OFT subsequently commenced a UK merger investigation. For further information on the OFT’s merger investigation see press releaseOFT statement on its investigation of Ryanair’s minority shareholding in Aer Lingus (29 October 2010)
  2. The reference test – the OFT has a duty to make a reference to the Competition Commission if it believes that it is or may be the case that a relevant merger situation has been created and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
  3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 
  4. Under the Enterprise Act 2002 the OFT may treat as a relevant merger situation a minority shareholding where that shareholding gives its owner the ability materially to influence the behaviour and policy of the target company including the target company’s strategic direction and commercial objectives. As stated in the OFT’s Mergers – jurisdictional and procedural guidance (OFT527, paragraph 3.15) this is a lower level of control than the ‘decisive influence’ test used by the European Commission under the EC Merger Regulation.
  5. The completed acquisition by British Sky Broadcasting Group PLC of 17.9 per cent of the shares in ITV PLC was ultimately found by the Competition Commission and the Secretary of State, upheld by the Court of Appeal, to give rise to a substantial lessening of competition such as to require remedial action. 
  6. Under the Enterprise Act 2002 the OFT is able to refer to the Competition Commission completed relevant mergers within four months of the merger’s completion or from the time material facts about the merger were made public. However, the Enterprise Act 2002 provides that the duty to refer applies outside this four month timetable when the reference could not have been made earlier because of anything done under or in accordance with the EC Merger Regulation.

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