Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: U.K. competition authority confirms full investigation of Poundland, 99p Stores merger, (Apr 17, 2015)

The proposed acquisition by Poundland Group plc of 99p Stores Limited will be referred for an in-depth phase 2 investigation, the Competition and Markets Authority (CMA) confirmed today. The agency announced on April 9 that it would refer the merger to a full investigation unless suitable undertakings are offered.

Both companies supply general merchandise at a single price point, ranging from stationery, homeware, gardening, and seasonal merchandise to groceries and other fast moving consumer goods. Following an initial investigation, the CMA has found that the transaction gives rise to a realistic prospect of a substantial lessening of competition in 80 local areas where the companies currently overlap – and in a further 12 areas where they will be competitors in the near future.

Insufficient evidence was available during the initial phase of investigation for CMA to be confident that the transaction would not result in a realistic prospect of a substantial lessening of competition through a possible reduction in quality, fewer promotions, or closure of stores.

Since the parties did not offer any undertakings to address the agency’s competition concerns, the CMA will now start an in-depth merger investigation to decide whether the merger raises substantial competition problems that need to be remedied. A decision on the merger will be made by a group of independent panel members supported by a case team of CMA staff. The group must publish its final decision by October 2, 2015.

Ryanair/Aer Lingus inquiry. The CMA announced that it has provisionally decided that there is no material change in circumstances or special reason for it not to implement the divestment remedy in its Ryanair/Aer Lingus inquiry.

Most of Ryanair’s stake in Aer Lingus was acquired in 2006, when Ryanair launched its first public bid for the Irish national air carrier. The European Commission (EC) later declared that the bid would significantly impede effective competition in the common market. In 2012, Ryanair’s minority stake in Aer Lingus was referred for investigation to the CMA. In response to the reference, Ryanair announced another public bid for Aer Lingus.

In February, Ryanair requested that the CMA re-examine its decision to require it to sell its 29.8 percent stake in Aer Lingus Group plc down to 5 percent. This request followed a judgment from the Court of Appeals dismissing Ryanair’s legal challenge to this decision.

Ryanair argued that IAG’s proposed bid for Aer Lingus, and the period of time that has elapsed since the decision was originally made by the CMA in its report in August 2013, constitute a material change of circumstances and that the CMA no longer had the power to impose a divestment remedy on Ryanair.

After receiving that request, the CMA invited submissions from interested parties. After considering responses from Aer Lingus, IAG and the Irish government – and further submissions from Ryanair – the inquiry group of independent CMA panel members considering this issue has provisionally decided that there is no material change in circumstances or special reason not to proceed to implement the remedies set out in the report. The CMA will now consider further responses before taking its final decision.

The CMA is also consulting on the terms of a draft final order that would implement the remedies. In the event that it maintains its provisional decision, the CMA would expect to make a final order taking account of any comments it received on this draft final order.

Simon Polito, Chairman of the Ryanair/Aer Lingus inquiry group said, “We have carefully considered submissions from Ryanair and others and taken into account all the relevant circumstances, including the fact that the IAG bid is conditional on receiving an irrevocable commitment from Ryanair. Having done so, our provisional view is that neither recent events nor the time that has passed since our final report are reasons not to implement the divestment remedy.”

Companies: Poundland Group plc; 99p Stores Limited; Ryanair Holdings plc; Aer Lingus Group plc

News: AcquisitionsMergers Antitrust