CAT 3
7 Mar 2014
Judgment of the Tribunal on an application by Ryanair Holdings plc (“Ryanair”) for review of the final report of the Competition Commission (“CC”) dated 28 August 2013 concerning Ryanair’s acquisition of a minority shareholding in Aer Lingus Group plc (“Aer Lingus”). 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.
By its application, Ryanair challenged the lawfulness of the final report on six 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 CC’s decision to require divestiture is contrary to the EU law duty of since cooperation, as it would undermine any subsequent ruling by the European Commission (if Ryanair’s ongoing appeal to the General Court from the European Commission’s decision of 27 February 2013 is successful) that Ryanair is entitled to acquire the whole of Aer Lingus. For the reasons set out in the judgment, the Tribunal concluded that the CC’s decision to impose a divestiture order does not breach the duty of sincere cooperation. In particular, the Tribunal rejected Ryanair’s submission that it is an EU objective that an acquisition, once cleared by the European Commission under the EUMR, does in fact take place.
(2) Ryanair submitted that it was procedurally unfair to keep secret from Ryanair material allegations and evidence which the CC relied upon in reaching its decision, in particular the identity of certain airlines that had provided evidence to the CC during its investigation. For the reasons set out in the judgment, the Tribunal concluded that, both globally and in relation to the specific matters relied on by Ryanair, Ryanair was informed of the gist of the case which it was required to answer, and was in a position to make worthwhile representations in answer to the case it had to meet.
(3) Ryanair submitted that the CC had erred in law by failing to appreciate the need for a causal connection between Ryanair’s acquisition of material influence over Aer Lingus and the alleged SLC. Ryanair submitted that the CC had wrongly relied on on various ways in which Ryanair’s minority stake may result in an SLC but which have nothing to do with its alleged material influence. The Tribunal concluded that the CC had applied the correct approach, by seeking to compare the situation where the relevant merger situation prevailed with one where it did not. This exercise does not require the CC to limit itself to the examination of competitive effects which are causally connected to the mechanism by which two or more enterprises case to be distinct, in this case Ryanair’s ability to exercise material influence over the policy of Aer Lingus.
(4) Ryanair submitted that the CC’s SLC finding was irrational, as it rests on highly speculative theories of harm, and is unsupported by the evidence. Having considered the elements of the CC’s SLC finding, the Tribunal found that the CC’s conclusion that there is an SLC is one it was entitled to reach, and the Tribunal found no basis for overturning this conclusion on the grounds put forward by Ryanair.
(5) Ryanair submitted that the CC’s divestiture remedy and the immediate appointment of a divestiture trustee were disproportionate, given Ryanair’s willingness to offer undertakings which were equally (or more) effective but less intrusive, and less destructive of Ryanair’s interests. The Tribunal rejected Ryanair’s submissions, finding that the CC acted in a reasonable and proportionate manner in rejecting Ryanair’s remedies proposals, and was entitled to impose a remedy which would result in no realistic prospect of an SLC materialising.
(6) Ryanair submitted that the CC does not have jurisdiction to impose requirements on Ryanair, an Irish company which does not carry on business in the UK. The Tribunal concluded that the CC did not err in its assessment of its jurisdiction to impose a remedy on Ryanair on the basis of the material before it.
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.