OFT statement on Court of Appeal judgment on Ryanair and Aer Lingus
41/12 22 May 2012
The OFT has welcomed today's Court of Appeal judgment that it is 'in time' to investigate Ryanair's acquisition of a minority stake in Aer Lingus. The Court of Appeal dismissed Ryanair's appeal against the Competition Appeal Tribunal's earlier ruling on this issue.
The Court of Appeal agreed that the OFT was unable to apply its national merger control legislation whilst appeals were ongoing in the European courts. The judgment confirmed that 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 decisions' and a 'clash of jurisdictions' that would have been contrary to the duty of sincere co-operation for Member States 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 a substantial lessening of competition. The OFT wishes to ensure that it is able to review whether Ryanair's stake in Aer Lingus harms competition and, if this may be the case, whether a detailed review by the Competition Commission is appropriate.
The parties have now agreed that the OFT will have a further 15 working days to consider whether to refer the acquisition to the Competition Commission.
The Court ordered that Ryanair must pay the OFT's costs of the appeal. Ryanair also applied to the Court of Appeal for permission to appeal to the Supreme Court, which was refused. Ryanair now has 28 days in which it can apply directly to the Supreme Court for permission to appeal.
- 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 3). The OFT subsequently commenced a UK merger investigation. For further information on the OFT's merger investigation see press release OFT statement on its investigation of Ryanair's minority shareholding in Aer Lingus (29 October 2010).
- In September 2011, Ryanair appealed to the Court of Appeal against the CAT's judgment that the OFT was in time to investigate Ryanair's acquisition of a minority stake in Aer Lingus. In November 2011 the Court of Appeal stayed the OFT's investigation until the appeal had been determined.
- 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.
- The parties have agreed to extend the four month period mentioned in section 24 of the Act by 15 working days pursuant to section 25(1) of the Act. The statutory deadline has therefore been extended to the 13 June 2012.
- The Court of Appeal considered the appeal at a hearing on 24-25 April 2012.
- 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.
- 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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