On 28 August 2013, the UK Competition Commission (CC; the second stage regulator), applying the UK merger control rules, required airline Ryanair to reduce its 29.8 per cent stake in airline Aer Lingus down to 5 per cent. This will be accompanied by obligations on Ryanair not to seek or accept board representation or acquire further shares. Ryanair and Aer Lingus compete on routes between the UK and Ireland.
The rationale for this decision was that Aer Lingus’ commercial policy and strategy were likely to be affected by Ryanair’s minority shareholding, in particular because it was likely to impede or prevent Aer Lingus from being acquired by, or combining with, another airline (in a market in which scale is important). The CC was also concerned that Ryanair’s minority shareholding was likely to affect Aer Lingus’ commercial policy and strategy in other ways: by allowing Ryanair to block certain shareholder decisions; by restricting Aer Lingus’ ability to issue shares and raise capital; and by limiting Aer Lingus’ ability to manage effectively its portfolio of London Heathrow Airport slots. Ryanair’s shareholding also increased the likelihood of Ryanair mounting further bids for Aer Lingus, with the associated disruption to Aer Lingus’ ability to implement its commercial strategy.
The case demonstrates that the UK merger control (and general competition law) implications of the acquisition of a minority stake by one company in a competitor need to be considered carefully. The same issue may arise in other EU jurisdictions. It should also be noted that the European Commission is currently consulting on potential modifications to EU merger control law, including whether to expand the EU merger control rules to address the anticompetitive effects arising from certain acquisitions of non-controlling minority shareholdings (the issue in the Ryanair/Aer Lingus case).