Low-cost carrier Ryanair has said it will appeal the UK Competition Commission’s August 28 ruling that it must reduce its holding in Ireland’s Aer Lingus from 29.8 percent to 5 percent. The British anti-trust regulator ruled that Ryanair’s position as the largest shareholder in Aer Lingus “had led or may be expected to lead to a substantial lessening of competition between the airlines on routes between Great Britain and Ireland.” The decision follows last year’s European Commission ruling that blocked Ryanair’s third attempt at acquiring full control of Aer Lingus.
According to Competition Commission deputy chairman Simon Polito, the UK inquiry team concluded that competition between Ryanair and Aer Lingus remains “at least as intense” as it was before the former first bought a stake in the latter in 2006. “However, we consider that there is a tension between Ryanair’s position as a competitor and its position as Aer Lingus’s largest shareholder, and that Ryanair has an incentive to weaken its rival’s effectiveness as a competitor,” he added. “Ryanair’s minority shareholding affects Aer Lingus’s commercial strategy in various ways that could be crucial to Aer Lingus’s future as a competitive airline. We are particularly concerned about Ryanair’s ability, either directly or indirectly, to impede Aer Lingus from combining with another airline to build scale and achieve synergies to remain competitive.”
Dublin-based Ryanair characterizes the Competition Commission’s concerns as “baseless” and at odds with the EC’s February 2013 ruling that competition between the two carriers has intensified since 2007. Chief executive Michael O’Leary accused the Competition Commission of conducting an unfair inquiry. “This report by the UKCC is bizarre and manifestly wrong, but also not entirely unexpected,” he commented. “This prejudicial approach to an Irish airline is very disturbing, coming from an English government body that regards itself as a model competition authority.”
According to law firm Cadwalader, which represents Aer Lingus, the Competition Commission ruling amounts to a “landmark finding” based on the premise that UK law allows merger control scrutiny of minority shareholdings, which do not count as mergers under European Union rules. “Ryanair’s 29.82-percent shareholding has been used as a Trojan horse against Aer Lingus for the past seven years since the original 2006 [takeover] bid,” said Cadwalader managing partner Alec Burnside. “It has been the platform for Ryanair’s failed rebids for Aer Lingus in 2008 and 2012. The CC has now found that those rebids have harmed competition between the two rivals. The European Commission needs jurisdiction to scrutinize and protect businesses from anti-competitive minority shareholder situations like this one.”