Ryanair maintains its substantial minority shareholding in Aer Lingus but prohibited from full takeover

28 Jul 2010

The General Court (Case T-342/07 and Case T-411/07)  upheld two decisions of the EU Commission in respect of the long standing dispute between Ryanair and Aer Lingus as to the future ownership and control of the smaller airline.  The Commission had considered that the acquisition would significantly impede effective competition, in particular as a result, firstly, of the creation of a dominant position on 35 routes to and from Dublin, Shannon and Cork, and, secondly, of the creation or strengthening of a dominant position on a further 15 routes.  It therefore declared the concentration incompatible with the common market as it would have harmed consumers by removing this competition and creating a monopoly or a dominant position on the routes operated by both parties.

Ryanair based their application to annul the decision on several grounds including the effects of the liberalisation of the EU airline passenger market on market entry and thus the inability of the merged group to raise price and reduce quality, on the weakness of Aer Lingus and its lack of sustainability as a small regional airline and on Ryanair’s willingness to provide commitments more than necessary to meet any perceived adverse effects on competition.  The General Court held that in its judgment the Commission had not erred in its analysis of competition, including competition between the two airlines on origin and destination markets, that the combined market shares were very high, that each was the other’s closest rival and that there were barriers to entry on the relevant markets. It also confirmed the Commission’s decision that the commitments were not sufficient.

In a separate judgment the General Court confirmed the Commission’s decision that the acquisition by Ryanair of a minority stake in Aer LIngus did not amount to control within the meaning of the EU Merger Regulation and that the Commission’s powers, when they found that a proposed acquisition would significantly impede competition, did not extend to divestment of the whole or part of  a shareholding that fell below that of control. There was ample evidence that Aer Lingus continued to act independently of Ryanair.

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John Swift QC