The seven-year ownership battle between Aer Lingus and Ryanair has prompted a proposed shake-up of mergers law that could allow State and EU authorities to investigate the impact of minority stakes on competition between businesses.
Under current Irish and EU competition law, only deals involving one rival taking a controlling interest – more than 50 per cent – of another are open to scrutiny by the authorities; minority holdings, that is less than half, are not.
The only exceptions to this are Germany and the UK, whose systems allow minority stakes as they regard influence rather than control as being the critical test.
However, the European Commission now looks set to introduce this approach across the EU, which means that all member states, including the Republic, will have to introduce merger control rules to govern the acquisition of non-controlling minority shareholdings. It is expected to take a year for the new legislation to go through.
Ryanair’s 29.8 per cent stake in Aer Lingus and its three unsuccessful attempts to take over its rival helped prompt the European Commission to propose expanding mergers law in this way.
A consultation document circulated by the commission on proposals to change the law cites the relationship between the two as an example of the type of situation that it is seeking to tackle.
It points out that after the European Commission barred Ryanair from buying Aer Lingus in 2007, the airline was able to keep its minority stake in its rival.
The European authorities were unable to do anything about this because EU mergers law only allows for the review of majority stakes or operations leading to the acquisition of control of a business.
UK investigation
However, as its regime allows the review of minority stakes, the UK Competition Commission was able to investigate Ryanair's holding in its rival and ruled last week that it should be cut to 5 per cent from 29.8 per cent.
The agency moved at the behest of the Office of Fair Trading, which moved after Brussels had ruled against a Ryanair bid. The UK investigation took 11 months.
The commission said this week that the holding had led, or could lead to, a substantial lessening of competition between the two airlines on routes between Ireland and Britain. Ryanair has said that it will appeal the finding.
