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Brussels, 6th July 2010
Mergers: Commission welcomes General Court rulings in Ryanair case
The European Commission welcomes the judgment of the EU General Court (case T-342/07), dismissing Ryanair's appeal against its decision of June 2007 (see IP/07/893 and MEMO/07/258) that prohibited the acquisition of Aer Lingus by Ryanair. The Commission's decision found that the merger would have removed the intense competition between the two leading Irish airlines, harming more than 14 million passengers each year. The Court in particular acknowledged the Commission's very detailed and careful analysis of the competitive effects and the proposed remedies. This is the second time the Court validates the Commission's practice of analysing the impact of airline mergers on a route-by-route basis, focussing on market entry and accepting only remedies that resolve the identified competition concerns. In a separate ruling (case T-411/07), the Court also endorsed the Commission's assessment that it had no jurisdiction to require Ryanair to divest its minority shareholding in Aer Lingus.
Commission Vice President in charge of competition policy Joaquín Almunia stated: “The combination of Ryanair and Aer Lingus would have created a dominant position on 35 routes to the detriment of more than 14 million EU passengers that travel to and from Ireland each year. I am happy that the Commission's approach to airline mergers which can hurt citizens has been confirmed by the Court.”
The General Court confirmed the Commission’s detailed competitive analysis, which led to the conclusion that the proposed merger would have significantly impeded competition on 35 routes to and from Ireland.
It acknowledged in particular the careful analysis of the competitive effects of the merger and the remedies, stating that "the Commission took care to carry out an in-depth analysis of the conditions of competition by taking account of factors other than just market shares, such as the effects of the concentration on competition between Ryanair and Aer Lingus, the reactions which could be expected from customers and competitors and the actual situation on each route affected by the concentration" (paragraph 42 of the ruling).
The Court also endorsed the Commission's practice to analyse the effects of airline mergers on individual routes on which both companies' activities overlap. It further confirmed the Commission’s approach with regard to remedies. The judgement made clear that it is for the merging companies to propose clear and adequate remedies in due time with a view to entirely removing the competition concerns identified by the Commission and that Ryanair failed to do so in the course of the merger procedure. It also agreed with the emphasis the Commission puts on the analysis of actual and potential entry in airline merger cases.
In a separate ruling, the General Court also rejected an appeal by Aer Lingus against the Commission's decision with respect to Ryanair's minority shareholding in Aer Lingus. Aer Lingus had argued that the Commission should have also ordered Ryanair to divest its remaining minority shareholding of, at the time, 25.17% in Aer Lingus.
The Court found that under the EU Merger Regulation the Commission's prohibition decision prevented Ryanair only from acquiring a controlling share in Aer Lingus, but that the Commission could not force the sale of Ryanair's non-controlling minority share. The Commission had formerly rejected Aer Lingus' request in October 2007.
The Commission’s market investigation in the Ryanair/Aer Lingus merger would have created a very strong position on routes to and from Dublin, where the merged entity would have accounted for around 80% of all intra-European traffic.
The market investigation also revealed that it was particularly difficult to enter the Irish market, which made it unlikely that other airlines would enter into direct competition against a merged Ryanair/Aer Lingus.
This is the second time the General Court endorses the Commission's approach to assess airline mergers. In 2007 it confirmed the Commission's conditional clearance of the Air France-KLM merger, which had been attacked by Easyjet.
The Commission has dealt with various merger cases involving airlines in recent years. The facts of the Ryanair/Aer Lingus case, however, differed from most airline mergers, as it was the first time the Commission had to assess a proposed merger of the two main airlines in one country, with both operating from the same "home" airport - Dublin, as "low-cost" airlines on a "point-to-point" basis. Also, the number of overlapping routes was unprecedented compared with other airline cases.
The second ruling (Case T-411/07) concerned an appeal by Aer Lingus against a separate decision by the Commission concerning Ryanair's right to maintain its minority shareholding in Aer Lingus. After the prohibition decision, Aer Lingus had asked the Commission to order Ryanair to fully divest its remaining minority shareholding in Aer Lingus. The Commission's rejected this request by way of decision on 11 October 2007. This decision was subsequently appealed by Aer Lingus. The General Court confirmed that the Commission was right to reject Aer Lingus' claim and could not order Ryanair to divest its non-controlling shareholding in Aer Lingus.