On 15 June 2012, the OFT sent the completed acquisition by budget airline Ryanair of a 29.8% stake in competitor Aer Lingus to the UK Competition Commission for a detailed second-stage merger investigation. The OFT published the full details of its decision recently, explaining its reasoning. The analysis is a good reminder that a minority stake in a competitor can give rise to competition law concerns.
The OFT is concerned that Ryanair’s shareholding places it in a position to influence the commercial policy and strategy of Aer Lingus in a number of ways that could dampen competition to the disadvantage of UK passengers. It identified the following specific issues: Ryanair’s ability to weaken Aer Lingus as a competitor through use of its voting power at Aer Lingus shareholder meetings, for example through influencing how it uses key assets such as airport slots at London Heathrow airport; the fact that Ryanair’s shareholding may fetter Aer Lingus’ options to benefit from investment by other airlines which may, in turn, weaken the competitive position of Aer Lingus over time; and the fact that, as a result of its shareholding, Ryanair’s own incentives to compete against Aer Lingus may be dampened since it would be able to raise prices in the knowledge that a proportion of the profits of any lost passengers that switch to Aer Lingus would be recouped through its shareholding in Aer Lingus.
Although each such situation must be considered on its facts, it is clear that similar concerns could arise in other situations in which a company takes a minority stake in a competitor. These issues should be analysed at the outset.