Antitrust Alert: UK Competition Commission Requires Ryanair To Sell Most Of Its Minority Shareholding In Rival Aer Lingus

Last week the UK Competition Commission (CC) required airline Ryanair to reduce its 29.8% shareholding in rival Aer Lingus to 5 per cent. The CC ruled that Ryanair's gradual acquisition of its existing minority shareholding (i) created a relevant merger situation and (ii) had led or may be expected to lead to a substantial lessening of competition between the airlines. The decision follows the prohibition by the European Commission (EC) of Ryanair's third attempt to acquire Aer Lingus. It highlights the difference in treatment of minority shareholding acquisitions under EU and UK merger laws and reminds companies to tread carefully when acquiring even small stakes in a competitor.

The European saga: three unsuccessful bids but minority shareholding intact

Ryanair built up a stake of 19.2% in Aer Lingus before launching its first public offer for the airline in October 2006. It continued to build its stake, to just over 29%, only for the EC to block the deal under EU merger law. Ryanair appealed this decision to the EU General Court. During the EC's merger review, Aer Lingus asked the EC to force Ryanair to sell its minority shareholding should the merger be prohibited. However, the EC ruled that the acquisition of the minority shareholding – including the shares acquired following the bid announcement – did not trigger the application of the EU Merger Regulation (EUMR) and that it therefore did not have the power to require a sale of the shares. Aer Lingus, anxious to rid itself of a rival it believed interfered with its business, appealed that decision. After a long delay, the General Court rejected both Ryanair's and Aer Lingus' appeals in 2010. Meanwhile, Ryanair increased its stake in Aer Lingus to 29.8% and launched a second bid for the remaining shares in December 2008 only to drop it the following month after the Irish Government, Aer Lingus' second largest shareholder, indicated its opposition. In July 2012 Ryanair notified the EC of a third bid for Aer Lingus. The EC again blocked the deal, in February 2013. Ryanair has appealed that decision to the General Court.

EUMR vs UK merger control

Following the 2010 General Court ruling upholding the EC's decision that Ryanair's acquisition of a minority stake had not triggered the EUMR, the UK Office of Fair Trading (OFT) asserted jurisdiction on the grounds that the stake created a "relevant merger situation" for the purposes of UK merger control. The EUMR provides a one-stop shop for...