Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

European Commission prohibits Ryanair/Aer Lingus deal

with 3 comments

Last Wednesday the Commission confirmed that it has decided to prohibit -for the second time- the proposed merger between Ryanair and Aer Lingus merger (click here for the press release). This is the fourth prohibition decision adopted under Commissioner Almunia, and the 24th in the history of EU competition law.

The decision has not yet been published. We had assumed that while we waited for it we could at least report on Michael O’Leary’s (Ryanair’s CEO) reactions. However, Mr. O’Leary has not made any public statements of the kind that we were expecting (remember his analogy between the European Commission officials and North Korean economists?  :)

Ryanair has issued a press release in which it argues that its offer “was supported by an historic and unprecedented remedies package that included not one, but two upfront buyers (BA/IAG & Flybe) to take over approximately half of Aer Lingus’ short-haul business (…) The transfer to these upfront buyers of Aer Lingus’ business on the 46 crossover routes identified by the EU Commission, together with the relevant slots, aircraft, personnel and branding, was ensured by binding, irrevocable commitments by those upfront buyers including Board approvals”. In Ryanair’s view, “[t]he history of the EU’s treatment of Ryanair’s two offers for Aer Lingus conclusively proves that this prohibition is a “political” decision to pander to the vested interests of the Irish Government (a minority 25% shareholder in Aer Lingus) and is not one that is based on a fair and reasonable application of EU competition rules or precedent airline merger approvals in Europe”.

We have no clue on whether the allegations over the political motivations of the decision are founded or not. But politics aside, this case resuscitates some tricky substantive/institutional questions. The nature and scope of the remedies proposed by Ryanair was indeed pretty substantial, and arguably unprecedented (Ryanair had even pledged to give 100 million to Flybe to ensure its sustainability) so, query:

Are EU merger control rules on when an up-front buyer is a suitable one sufficiently clear? What discretion should the Commission enjoy in this regard? Ryanair has announced that it will appeal the decision before the General Court, so we should expect to have some answers to these question soon.

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Written by Alfonso Lamadrid

1 March 2013 at 4:51 pm

3 Responses

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  1. Seems to me that the point is less whether the commitment is unprecedented in historical terms but whether, as proposed, it would remove the competition issue. Looking at it from the outside, it seems to me that there is merit in the Commission’s doubts, given that the commitments only seemed to guarantee a competitor for a limited period of 3 years.

    John Schmidt

    1 March 2013 at 7:56 pm

  2. [...] EC’s prohibition of Ryanair/Aer Lingus raises questions about the EU’s rules on [...]

  3. It is also interesting to read the press release by Aer Lingus, which fights back Ryanair’s claims in no uncertain terms: “Aer Lingus’ position from the outset has been that Ryanair’s offer should never have
    been made. The series of inadequate remedy offers presented by Ryanair only
    underlines the view that Ryanair made its offer without any reasonable belief that it
    could obtain clearance”

    It is available at

    http://corporate.aerlingus.com/investorrelations/regulatorynews/2013pressreleases/Prohibition_Decision_270213.pdf

    A true dogfight in the air!:)

    Asimo

    2 March 2013 at 11:39 pm


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