OFT refers Ryanair stake to the Competition Commission

The Office of Fair Trading (OFT) has referred Ryanair’s stake in rival Aer Lingus to the Competition Commission for further investigation because of market concerns.

The move follows the refusal of a Supreme Court hearing for budget airline Ryanair.

It had wanted to challenge the Court of Appeal’s ruling that the OFT had not run out of time to scrutinise the minority 29.8 per cent stake.

The OFT had begun to investigate Ryanair’s link-up in 2010 but had to put it on ice when its bid to buy the rest of Aer Lingus was put under review by the European Commission and European Courts.

However, on Friday (15 June) the OFT referred the case to a second phase investigation, citing concerns that Ryanair’s stake may give it the ability to influence the commercial policy of Aer Lingus to the detriment of customers.

In a statement, the competition watchdog said the two airlines are owners of by far the largest operating routes between the UK and Ireland, taking 80 per cent of the estimated 370,000 per month scheduled air passengers.

The OFT’s three principle issues that need further investigation are that Ryanair could weaken Aer Lingus as a competitor through use of its voting power as a shareholder, that it could restrict outside investment options for its rival and that its own incentives to compete could be weakened as it would share a proportion of Aer Lingus’ profits.

Amelia Fletcher, OFT chief economist and decision maker in this case, said in a statement: “This OFT investigation has been into the acquisition of a minority stake in Aer Lingus. We are concerned that Ryanair’s shareholding places it in a position to influence the commercial policy and strategy of Aer Lingus in a number of different ways that could dampen competition to the disadvantage of UK passengers.

“We therefore believe it is important for the Competition Commission to investigate this shareholding in more detail. The time that has elapsed since the acquisition took place does not make it any less important to passengers that our competition concerns are considered.”

As reported in The Lawyer last month, Monckton Chambers silk Daniel Beard won a long-running case for the OFT (23 May 2012). The Court of Appeal ruled on the fallout from Ryanair’s blocked 2006 buyout attempt of rival Irish airline Aer Lingus.

The OFT’s case was supported by Aer Lingus, which turned to Cadwalader Wickersham & Taft partner Alec Burnside, Linklaters partner Eamonn Doran and Brick Court Chambers’ James Flynn QC.

Ryanair had been represented in the Court of Appeal by Blackstone Chambers’ Lord Pannick QC and Brian Kennelly, and was appealing against a Competition Appeal Tribunal ruling over the takeover.

After losing that judgment, Ryanair instructed Covington & Burling counsel Richard Mattick to apply for the right to appeal to the Supreme Court. That was unsuccessful.