The UK Competition Appeal Tribunal (CAT) has dismissed an appeal by Ryanair against last year’s decision by the UK Competition Commission (UKCC) ordering Ryanair to reduce its stake in Aer Lingus from 29.8% to 5%.

In August 2013, the UKCC held that the size of Ryanair’s shareholding in Aer Lingus allowed it to affect that airline’s commercial policy and strategy (for example by blocking special resolutions, impeding attempts by Aer Lingus to combine with any other airline and preventing the disposal of Aer Lingus’ Heathrow slots). 

Ryanair appealed the decision, claiming among other things that:

• The UKCC did not have jurisdiction over its activities, as an Irish-based company, outside of the UK.
• The UKCC breached its duty of sincere co-operation with the EU authorities (which have yet to rule on a separate appeal lodged by Ryanair in May 2013 in relation to a takeover bid).
• The order to divest was a disproportionate remedy given Ryanair’s undertakings to offer “effective but less intrusive” remedies.

In dismissing the appeal, the CAT held that the UKCC did have jurisdiction.  It found that there was no breach of the duty of sincere co-operation since the UKCC’s decision related to Ryanair’s minority stake; this did not trigger the jurisdiction of the European Commission which was concerned only with a (separate) outright bid for full ownership of Aer Lingus.  While recognising that the divestment order would affect Ryanair’s property rights (by making any future outright bid more difficult), the CAT held that it would not do so disproportionately, so long as the divested shares were sold at fair market value.  

Ryanair has stated its intention to appeal the CAT’s decision to the UK Court of Appeal.

Whatever the eventual outcome, the case highlights the extent to which the competition impact of a non-controlling minority stake in a rival company can be scrutinised.  

Contributed by Claire Waterson.

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