UK watchdog launches probe of Ryanair's Aer Lingus stake
The UK's Office of Fair Trading (OFT) has launched a merger investigation into Ryanair's near 30pc stake in Aer Lingus to determine whether the airline has exerted "material influence" over the former state-owned carrier's strategy, and if the shareholding has resulted in a substantial lessening of competition.
It will make its decision on Christmas Eve on whether to refer the case to the Competition Commission.
Ryanair yesterday lashed out at the OFT decision. While the European Commission has blocked a takeover attempt of Aer Lingus by Ryanair, the European Court of Justice said earlier this year that it couldn't overturn a previous decision by the commission which stated that Ryanair couldn't be forced to sell its stake in Aer Lingus.
Ryanair also noted that the OFT had just a four-month window from when Ryanair made its initial move on Aer Lingus in 2006 to decide whether to launch an investigation.
Aer Lingus welcomed the OFT decision, saying it followed confirmation that individual EU member states retained the right to probe shareholdings like Ryanair's, even though the European Commission can't.
Ryanair chief executive Michael O'Leary said OFT was trying to investigate a "non-existent issue".
Analyst Stephen Furlong at Davy Stockbrokers said he was surprised at the OFT.
But whether or not the OFT, which is headed by former Irish Competition Authority boss John Fingleton, can find a way to overcome the hurdle of the four-month rule remains uncertain. It has conceded that it must examine whether it remains within the statutory time period necessary to launch the investigation into the case.
A senior competition lawyer in the UK said he was unclear as to how the OFT could overcome the four-month rule.
"At first blush, this is an unusual case, given the history in Brussels and the various hoops the OFT has to go through to establish jurisdiction," David Marks, a partner with UK-based law firm CMS Cameron McKenna and a specialist in EU and UK competition law, told the Irish Independent yesterday.
"In particular, the OFT has to act within four months of the trigger event being public," he added, pointing out that the European Commission had already looked at this and effectively "shrugged its shoulders".
"However, the OFT is selective about the cases it prioritises and can be expected to have thought carefully about all aspects. A reference to the Competition Commission cannot absolutely be ruled out, but it seems early to speculate."
Even if the OFT does decide to refer the case to the UK's Commission Competition, Ryanair could conceivably take the OFT to court claiming the agency's decision is illegal as it didn't adhere to the four-month rule.
The Office of Fair Trading is already engaged with Ryanair and Aer Lingus on the case and will accept observations from third parties until November 12.