CAT 14
15 Jul 2015
Judgment of the Tribunal on an application by Ryanair Holdings plc (“Ryanair”) for review of the following decisions of the Competition and Markets Authority (“the CMA”) of 11 June 2015: (i) the finding that there had been no material change of circumstances (“the MCC Decision”) since the Competition Commission’s (“the CC”) final report of 28 August 2013 concerning Ryanair’s acquisition of a minority shareholding in Aer Lingus Group plc (“Aer Lingus”) (“the Final Report”); and (ii) the CMA’s remedies order requiring the appointment of a Divestiture Trustee to manage the partial disposal of Ryanair’s stake in Aer Lingus (“the Final Order”).
In its Final Report, the CC concluded that the minority shareholding gave Ryanair material influence over Aer Lingus and resulted in a substantial lessening of competition (“SLC”) within the meaning of section 35 of the Enterprise Act 2002 (“the Act”). The CC decided to impose a final order requiring Ryanair to divest itself of the majority of its holding in Aer Lingus, by reducing its stake to no more than 5%, such disposal to be through a sales process under a Divestiture Trustee.
In the MCC Decision, the CMA concluded that the public takeover bid for Aer Lingus by International Consolidated Airlines Group, S.A. (“IAG”) was not a material change of circumstances that required it to consider remedial action different from that set out in the Final Report.
By its application, Ryanair challenged the lawfulness of the MCC Decision and Final Order on three grounds. Ryanair’s grounds of review, together with the Tribunal’s conclusions in relation to each ground, are summarised briefly below:
1. Ryanair submitted that the MCC Decision and the decision to impose a Final Order were unlawful because, in reaching those decisions, the CMA misconstrued and misapplied the legal test under section 41(2) of the Act. Broadly, section 41(2) relates to the action the CMA must take to remedy, mitigate or prevent the SLC identified.
For the reasons set out in the judgment, the Tribunal rejected this ground. In particular, the Tribunal held that the Act did not require the CMA to conduct a fresh proportionality assessment when considering the implementation of the remedies it had already found to be proportionate in its final report. The Tribunal considered that the first step was for the CMA to consider whether a change is material in the sense that it may result in a different decision on remedy. The second stage is to consider what the decision on remedy ought to be in the light of that material change in circumstances, if any.
In this case, the CMA considered whether there had been any material changes in circumstances which would justify departing from the CC’s conclusions on remedies in the Final Report. Having found no such changes in circumstances, the CMA rightly decided to implement the remedies that it considered to be comprehensive and proportionate.
2. Ryanair argued that the MCC Decision was irrational because no reasonable competition authority could fail to conclude that there had been a material change of circumstances when the very thing it predicted would not happen (a bid for Aer Lingus), and which was critical to its original assessment, had in fact taken place.
For the reasons set out in the judgment, the Tribunal also rejected this ground. In particular, the Tribunal found that the CMA’s conclusion that the IAG proposed bid and formal offer did not constitute a material change of circumstances was one in its discretion it was entitled to reach.
3. Ryanair contended that the CMA’s decision to impose a Final Order was unreasonable, disproportionate and breached Ryanair’s legitimate expectations. This ground was withdrawn prior to the hearing in these proceedings and is therefore not considered in the judgment.
Accordingly, and for the reasons set out in the judgment, the Tribunal unanimously dismissed Ryanair’s application for review.
This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.