Non-Ministerial Department Of The U.K. Government Says No Reason To Not Require The Divestiture
The U.K.'s Competition Markets Authority (CMA), a non-ministerial department of the U.K. government, said Thursday that it has decided that there is no material change in circumstances or special reason for it not to require Ryanair to reduce its shareholding in Aer Lingus to 5%.
This follows the Competition and Markets Authority’s (CMA) provisional decision in April 2015.
The CMA has also published the final order requiring Ryanair Holdings plc (Ryanair) to sell its 29.8% stake in Aer Lingus Group plc (Aer Lingus) down to 5%.
In the light of IAG’s current bid for Aer Lingus, the CMA will ensure that implementation of this remedy interacts effectively with the bid process and the assessment of the bid by the European Commission.
"IAG’s bid for Aer Lingus is dependent on securing Ryanair’s agreement to sell its shareholding. This recent development illustrates that Ryanair can decide whether a bid for its major competitor on UK/Irish routes succeeds or fails," said Simon Polito, Chairman of the Ryanair/Aer Lingus inquiry group.
"This concern was an important part of our decision to require Ryanair to reduce its shareholding. It’s not good for competition when one company holds such an influence over the future of one of its major competitors.
"Although at this point Ryanair has yet to decide whether to sell its shares to IAG, we need to ensure that, whatever happens in relation to this particular transaction, Ryanair’s ability to hold sway over Aer Lingus is removed.
"It is clear that the timing of IAG’s bid has been influenced by the prospect of Ryanair being forced to sell the majority of its shareholding. IAG has said that it would not be interested in acquiring any airline with a significant minority investor. The conditional nature of IAG’s bid is consistent with this and our original assessment that Ryanair’s presence was likely to deter other airlines from entering into, pursuing or concluding combinations with Aer Lingus.
"In our view the circumstances of the IAG bid and other issues raised by Ryanair do not amount to a material change in circumstances or special reason not to take action to remedy the substantial lessening of competition identified in our 2013 report.
"We will liaise closely with other authorities to ensure that our requirement for Ryanair to reduce its stake in Aer Lingus works effectively alongside shareholders’ consideration of the IAG bid and assessment of the bid by the European Commission."
In February 2015, Ryanair had requested that the CMA re-examine its decision to require it to sell its 29.8% stake in Aer Lingus down to 5%. This followed a judgment from the Court of Appeal dismissing Ryanair’s legal challenge to this decision.
Ryanair argued in particular that IAG’s proposed bid for Aer Lingus and the period of time that has elapsed since the decision was originally made by the Competition Commission in its report in August 2013, constituted a material change of circumstances and that the CMA was no longer entitled to impose a divestment remedy on Ryanair.
After receiving that request, the CMA invited submissions from interested parties. After considering responses from Aer Lingus, IAG and the Irish government – and further submissions from Ryanair – the inquiry group of independent CMA panel members provisionally decided that there had been no material change in circumstances or special reason not to proceed to implement the remedies set out in the report. Following that provisional decision, which was published in April 2015, the CMA considered further submissions before coming to its final decision.
In a news release, Ryanair called the ruling "ridiculous."
"[The] CMA decision rejecting Ryanair’s request to review its order to divest Ryanair’s 29.8% minority stake in Aer Lingus is manifestly wrong and flies in the face of the current IAG offer for Aer Lingus. When the only basis for the CMA’s original divestment ruling was that Ryanair’s minority shareholding was or would prevent other airlines making an offer for Aer Lingus, the recent offers by IAG for Aer Lingus totally disprove and undermine the bogus theories and invented evidence on which the CMA based its untenable divestment ruling," said Ryanair spokesman Robin Kiely in a statement posted on the airline's website.
"Simon Polito and his group were unable to establish any consumer harm arising from Ryanair’s minority stake in Aer Lingus and instead resorted to speculating (in the CMA’s August 2013 report) that Ryanair’s 29.8% shareholding would deter other airlines from merging with or bidding for Aer Lingus. IAG’s current offer for Aer Lingus proves that the the CMA’s invented theory of harm was hopelessly wrong, and is now unsustainable given that the circumstances have manifestly changed, and accordingly the divestment remedy must be revoked in light of this compelling evidence.
"Ryanair has instructed its lawyers to appeal today's ridiculous decision to the Competition Appeal Tribunal, given that it is factually unsustainable and legally flawed as the IAG offer for Aer Lingus proceeds.
"In parallel, Ryanair’s lawyers are currently seeking permission to appeal the unsustainable 2013 report to the UK Supreme Court.”
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