Antitrust Law Daily Wrap Up, ANTITRUST NEWS: CMA confirms order that Ryanair reduce its stake in Aer Lingus, (Jun 11, 2015)

By Edward L. Puzzo, J.D.

The U.K.’s Competition and Markets Authority (CMA) has confirmed its requirement that Ryanair reduce its stake in Aer Lingus from 29.82 percent down to 5 percent, the CMA announced today.

In August 2013, the CMA’s predecessor, the Competition Commission (CC), found that Ryanair’s stake in Aer Lingus gave it an incentive to weaken Aer Lingus’ effectiveness as a competitor, which could lead to a substantial lessening of competition (SLC) in the markets for air passenger services between Great Britain and Ireland. As a remedy for the SLC, the CC directed, as both effective and proportionate, a partial divestiture to reduce Ryanair’s shareholding in Aer Lingus to 5 percent of Aer Lingus’ issued ordinary shares.

In February 2015, Ryanair requested that the CMA re-examine its decision following the dismissal of Ryanair’s legal challenge to this decision. Ryanair argued in particular that a recent bid for Aer Lingus made by International Consolidated Airlines Group (IAG) constituted a material change of circumstances and that the CMA was no longer entitled 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 provisionally decided that there had been no material change in circumstances or special reason not to proceed to implement the remedies set out in the report. Following that provisional decision, which was published in April 2015, the CMA considered further submissions before coming to its final decision finding no material change of circumstances or special reason for it not to implement the remedies in the Ryanair/Aer Lingus inquiry.

In the light of IAG’s current bid for Aer Lingus, the CMA will ensure that implementation of this remedy interacts effectively with the bid process and the assessment of the bid by the European Commission.

Simon Polito, Chairman of the Ryanair/Aer Lingus inquiry group, stated:

“IAG’s bid for Aer Lingus is dependent on securing Ryanair’s agreement to sell its shareholding. This recent development illustrates that Ryanair can decide whether a bid for its major competitor on UK/Irish routes succeeds or fails......This concern was an important part of our decision to require Ryanair to reduce its shareholding. It’s not good for competition when one company holds such an influence over the future of one of its major competitors....It is clear that the timing of IAG’s bid has been influenced by the prospect of Ryanair being forced to sell the majority of its shareholding. IAG has said that it would not be interested in acquiring any airline with a significant minority investor. The conditional nature of IAG’s bid is consistent with this and our original assessment that Ryanair’s presence was likely to deter other airlines from entering into, pursuing or concluding combinations with Aer Lingus.”

Companies: Ryanair Holdings plc; Aer Lingus Group plc; International Consolidated Airlines Group, S.A.

News: Antitrust