UK: OFT Cleared To Investigate Ryanair/Aer Lingus Merger

The Competition Appeal Tribunal ('CAT') has confirmed that the OFT is in time to review Ryanair's acquisition of a minority interest in Aer Lingus, despite the acquisition dating back to 2006.  The ruling provides important clarification of the scope of UK merger control law and its interaction with the EU merger control regime.

In January 2011, the OFT announced that it believed it was 'in time' to review Ryanair's minority shareholding (of 29.82%) (see Community Week Issue 503). The OFT had refrained from launching an investigation until the appeals in the General Court against two European Commission decisions in 2007 (relating to Ryanair's bid for Aer Lingus) had concluded and the time period for further appeal had expired.

Ryanair subsequently appealed to the CAT, challenging the OFT's assertion that it was within time to review the 2006 merger.

Normally, the OFT only has four months from when a merger is completed to make a reference to the Competition Commission.  However, s.122(4) of the Enterprise Act 2002 provides that the period for making a reference may be extended where a reference could not have been made previously "because of the EU Merger Regulation or anything done under in or accordance with [it]".  The OFT stated that it considered that in this case time had been extended because the OFT could not have investigated the minority shareholding while the appeals from the European Commission's decisions were ongoing before the General Court.   Ryanair disagreed, maintaining that the OFT was out of time, and brought an application for review.

The Tribunal upheld the OFT's position.  Had the OFT opened an investigation while the EU appeal process was ongoing, there would have been a risk of inconsistent outcomes and a conflict of jurisdiction which Member State authorities are required to avoid as a result of the duty of sincere cooperation imposed on them by the TFEU.  The Tribunal stated that s.122(4) was the statutory mechanism which allowed the UK competition authorities to avoid such conflict, and that the provision continued to apply until the appeals at EU level had been completed.

Ryanair has stated that it intends to seek permission to appeal to the Court of Appeal, and expressed its concern at the longstanding uncertainty raised by the process.

This is the first time that the OFT has relied on s.122(4) to extend the time period for reviewing mergers.

To view Community Week, Issue 532, 5^th August 2011 in full, Click here.

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