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Ryanair Loses Aer Lingus Appeal

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 July 2010


The European Union’s General Court has confirmed the European Commission’s earlier prohibition of the acquisition of Aer Lingus by Ryanair, following a private bid by the UK airline in October 2006.

Following the privatisation of Aer Lingus by the Irish Government in 2006, Ryanair acquired a shareholding of 19.16% in the share capital of the Irish airline. On October 23, 2006, Ryanair launched a public bid for the entire share capital of Aer Lingus and notified the Commission a week later of its planned takeover, in accordance with the Merger Regulation. During the public bid, Ryanair bought further shares and on November 26, 2006, it held 25.17% of Aer Lingus’s share capital.

On June 27, 2007, the Commission adopted a decision declaring that Ryanair’s planned takeover of Aer Lingus was incompatible with the common market. Ryanair brought an action against that decision before the General Court (Case T-342/07). Following the Commission’s decision Ryanair bought further shares bringing its shareholding in Aer Lingus’s capital to 29.3%.

Both during the procedure which led to the prohibition decision and following that decision, Aer Lingus requested the Commission to order Ryanair to divest all of its shares in Aer Lingus. In its decision dated October 11, 2007, the Commission refused to grant that request, stating that it was not in its power under the Merger Regulation to order Ryanair to divest its shareholding since the planned takeover had not been implemented and Ryanair only held a minority shareholding which did not enable it to exercise either de jure or de facto control over Aer Lingus. Aer Lingus brought an action against that decision before the General Court (Case T-411/07). By order of March 18, 2008, the President of the General Court rejected the parallel application made by Aer Lingus for interim measures to prevent Ryanair from exercising its voting rights.

In the most recent judgement, affirming the Commission’s earlier decision, the General Court has ruled that none of the arguments put forward by Ryanair is capable of calling into question the findings made by the Commission in that decision. The court agreed with the Commission’s statement that the implementation of the merger would significantly impede effective competition as a result of the creation of a dominant position on a number of routes from or to Dublin, Cork and Shannon. “Those dominant positions are monopolistic or very significant and are sufficient, in themselves, to validate the Commission’s finding that the implementation of the merger must be declared incompatible with the common market,” the Court said.

In addition, the Court found that Ryanair did not submit any arguments which were capable of calling into question the Commission’s assessment that the commitments proposed during the administrative procedure, some of which were very late, would not be capable of remedying in a viable and durable manner the barriers to competition which would result from the merger.

As regards the decision refusing to order Ryanair to divest its shareholding, the General Court notes that, according to the Merger Regulation, the acquisition of a shareholding which does not, as such, confer control of a company – that is to say the possibility of exercising decisive influence over the activity of the undertaking – does not constitute a merger which is deemed to have arisen for the purposes of that regulation. In the absence of effective control by Ryanair over Aer Lingus, Ryanair’s shareholding cannot be likened to a merger that has already arisen, which would give the Commission the right to act. Accordingly, the General Court concluded that the Commission’s decision not to order Ryanair to divest its shareholding in Aer Lingus was justified.

TAGS: court | business | European Commission | Ireland | law | aviation | United Kingdom | Europe

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