Competition

Merger - Substantial lessening of competition - Whether tribunal erring

Ryanair Holdings plc v Office of Fair Trading and another: CA (Civ Div) (Sir Andrew Morritt, Lord Justice Hughes, Lord Justice McFarlane): 22 May 2012

The claimant company was an airline operator. It acquired a large amount of the issued share capital of the second respondent company (Aer Lingus).

In 2006, the claimant had also made a bid to acquire the outstanding share capital of Aer Lingus and, pursuant to article 4 of Council Regulation (EC) 139/2004 (on the control of concentrations between undertakings) (the merger regulations), had lodged a notification with the European Commission (the commission) of its proposed concentration by acquiring the issued share capital in Aer Lingus.

The result was that, in 2010, the Court of First Instance of the EU upheld a ruling of the commission to the effect that, pursuant to article 8(3) of the merger regulations, the proposed concentration was prohibited. Thereafter, the defendant gave notice to the claimant under section 31 of the Enterprise Act 2002 (the 2002 act) seeking information from the claimant to enable the Office of Fair Trading to determine whether a merger situation had arisen such as required it to make a referral to the Competition Commission.

The claimant objected on the ground that the four-month time ­period within which the OFT might have made such a reference under section 22 of the 2002 act had expired. The OFT disagreed and the claimant accordingly applied to the Competition Appeal Tribunal (the ­tribunal) for a declaration that the time within which the OFT might refer any merger situation arising from the acquisition, actual or proposed, by the claimant of shares in Aer Lingus had expired.

The tribunal concluded that section 122(4) of the 2002 act had required the OFT to comply with the duty of sincere co-operation, and to avoid the risk of impermissible conflicts with article 21(3) of the merger regulations and/or between decisions taken, or to be taken, by the EU merger control system and decisions of the UK ­competition authorities. The result had been that where section 122(4) of the 2002 act had applied, it had had the effect of preserving the possibility of a reference under section 22 of the 2002 act pending final resolution of the EU process.

In those circumstances, the tribunal held the relevant uncertainty created by the appeal process to the Court of First Instance had persisted until the time for appealing against the judgment of that court had expired, with the effect that the OFT’s reference had been ­permissible. The claimant appealed.

The claimant submitted that it was for the national court to have ­determined what was required to ­satisfy the duty of sincere co-operation rather than the OFT, so that the reference could have been made and pursued so long as the Competition Commission abstained from reaching any conclusion before the Court of Justice of the EU had reached its ­conclusion.

Accordingly, section 122(4) of the 2002 act had not applied as there had been nothing to preclude the OFT making the necessary reference within the required period. The OFT and Aer Lingus contended that the duty of sincere co-operation had extended to avoiding any risk of a clash of jurisdictions, not only ­inconsistent final conclusions, and that accordingly the claimant had been seeking to take too limited a view of what the duty of sincere co-operation had required. The appeal would be dismissed.

The merger regulations and the 2002 act conferred extensive powers of investigation on, respectively, the commission, the OFT and Competition Commission, both before and after a notification or reference was made. Although not looking for quite the same thing, those respective bodies would be investigating the same events. The definition of a ‘concentration having a community dimension’ contained in the merger regulations, for which the commission would be looking, was not the same as a ­‘merger situation’ as defined in the 2002 act, which would concern the OFT. Accordingly, there could be no question of the conclusions of one being adopted without further enquiry by the other.

There was, however, ­considerable overlap in the exercise of the two jurisdictions. The processes of an OFT investigation with a view to possible referral to the Competition Commission, and of any enquiry by that commission before its decision, were, in both cases, intensive. They were likely to involve extensive gathering of information from a number of parties (see [38] of the judgment).

In the present case, there had been intensive investigation, and preliminary views were being expressed, before there was even a reference to the Competition Commission, let alone an enquiry by it. It was self-evident that concurrent investigations in the UK and in Europe would have been both oppressive and mutually destructive. Therefore, the duty of sincere ­co-operation went beyond avoiding inconsistent decisions and extended to overlapping jurisdictions. In the present case, if the appeal process had been successful there would have been an immediate clash of jurisdictions.

So long as the appeal process in the Court of Justice was pending and, after its conclusion, the time for any further appeal still running, the duty of sincere co-operation had applied. Its due observance had required the OFT to desist from making any reference or taking any other action under the domestic legislation. Thus, the OFT had not been precluded from making a ­reference under section 22 of the 2002 act of the claimant’s proposed takeover of Aer Lingus to the Competition Commission as the risk of conflict had not arisen at that stage.

A risk had not arisen and the duty of sincere co-operation required the OFT to avoid it by refraining from making any reference until all appeals had been dismissed (see [38]-[41], [46], [47] of the judgment). Accordingly, the decision of the ­tribunal was correct (see [44] of the judgment).

Lord Pannick QC and Brian Kennelly (instructed by Covington & Burling) for the claimant; Daniel Beard QC and Julian Gregory (instructed by the General Counsel, the 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.