Merger - Substantial lessening of competition Claimant airline seeking to purchase 30% share in second respondent airline

Ryanair Holdings plc v Office of Fair Trading and another: CA (Civ Div) (Lord Justices Lloyd, Elias and Kitchin): 21 December 2011

Rule 61 of the Competition Appeal Tribunal Rules 2003, so far as material, provides: ‘(1) The tribunal may make an order on an interim basis - (a) suspending in whole or part the effect of any decision which is the subject matter of proceedings before it… (2) Without prejudice to the generality of the foregoing, if the tribunal considers that it is necessary as a matter of urgency for the purpose of - (a) preventing serious, irreparable damage to a particular person or category of person, or (b) protecting the public interest, the tribunal may give such directions as it considers appropriate for that purpose.'

The claimant (Ryanair) bought 30% of the shares in the second respondent (Aer Lingus) with a view to a full takeover. In 2007, the European Commission refused the takeover but also refused to order Ryanair to sell its minority stake in Aer Lingus. In September 2010, the first respondent Office of Fair Trading began an investigation into Ryanair’s acquisition of the minority holding in Aer Lingus, seeking to determine whether a ‘relevant merger situation’ had been created which could have adverse competition consequences. Were that conclusion to be drawn, the matter could be referred to the Competition Commission (CC). Under section 22 of the Enterprise Act 2002 (the act), time limits applied to the investigation. A dispute arose as to whether the time limit ran from the point when the European Commission ended its investigation into the acquisition, as Ryanair contended, or from the time when no further appeal was possible to the Court of Justice of the European Union, as the OFT contended. The OFT made a preliminary decision that the time limit ran from the later date, allowing the investigation to continue. Ryanair appealed against that decision.

The issue was whether the court could (and, if so, should) achieve a position in which time stopped running for the OFT to refer the matter to the CC, pending the determination of the appeal. Both Ryanair and the OFT contended that, if that was possible, the OFT should pause in its investigation. Aer Lingus contended that it could not be done, and that even if it could it ought not to be done, or, if at all, only on different terms to those proposed by Ryanair. Consideration was given, inter alia, to rule 61(2) of the Competition Appeal Tribunal Rules 2003 (SI 2003/1372) (the rules).

The court ruled: To satisfy the conditions under rule 61(2), the direction had to be considered necessary, as a matter of urgency, for one or other (or both) of the specified purposes. The purposes were to prevent serious irreparable damage to a particular person or category of person, or to protect the public interest (see [61] of the judgment).

The requirement of urgency would be easily met, since if the process were to be stopped in its tracks, it had to be done either on the date of the hearing of the application or at the latest within the next few days. The question of necessity would also be satisfied, in that the only way to avoid the waste of public and private resources would be to suspend the running of time for the OFT’s investigation. Otherwise, the OFT would have to continue its process and, assuming that it decided to refer the matter, the CC would have no option but to begin its own investigation. The objective of avoiding the waste of public resources and unnecessary duplication would in the instant case be properly regarded as a protection of the public interest (see [65]-[67] of the judgment).

It would be appropriate to make the direction sought (see [69] of the judgment). YD (Turkey) v Secretary of State for the Home Department [2006] All ER (D) 107 (Feb) distinguished.

Regarding the terms of the order, sufficient and adequate protection could be given to Aer Lingus by the preservation in the order sought by Ryanair of the OFT’s powers to act. To give greater protection to Aer Lingus would go considerably further than was justified by the need to ensure that protection was available for it against inappropriate advantage being taken by Ryanair of the delay during the period while the investigation would be in abeyance of the proposed order (see [73] of the judgment). The order would be granted in the terms sought (see [8] of the judgment).

Lord Pannick QC and Brian Kennelly (instructed by Covington & Burling) for Ryanair; Daniel Beard QC and Julian Gregory (instructed by the general counsel, Office of Fair Trading) for the OFT; James Flynn QC, Kelyn Bacon and Daniel Piccinin (instructed by Cadwalader Wickersham & Taft and Linklaters) for Aer Lingus Group Plc.