Commission prohibits Ryanair’s third attempt to acquire Aer Lingus
On 27 February 2013, the European Commission prohibited Irish low-cost airline Ryanair’s proposed acquisition of former Irish flag carrier Aer Lingus. Extensive remedy proposals proved insufficient to sway the Commission, which considered the two firms to be each other’s closest – and on some routes only – competitors, and which found that dominance or outright monopoly would have resulted on 46 European routes. This is the third time Ryanair has tried to acquire Aer Lingus since 2006.
Ryanair announced its most recent bid to buy Aer Lingus in July 2012 and submitted a merger notification to the Commission the same month. The Commission opened an in-depth phase II review of the acquisition on 29 August 2012, and it issued its statement of objections on 13 November 2012.
The transaction, as initially notified, raised serious concerns. First, the two airlines represented 87% of short-haul flights out of Dublin in 2012 and 80% of short-haul traffic from Dublin, Cork, Shannon, and Knock. Second, the airlines share the same “home” airports and have largely overlapping routes. In addition, the firms’ shared point-to-point flight model, unusual in the industry where hub-and-spoke models are the norm, meant that even on routes where other scheduled carriers operated, the Commission considered Ryanair and Aer Lingus to be uniquely competitive with each other and largely immune from potential competition.
Ryanair’s proposed remedies reportedly would have entailed selling over half of Aer Lingus’ short-haul business to UK-based regional carrier Flybe, both to break up a near-monopoly and to set up a viable competitor. Further remedies reportedly included ceding Gatwick airport slots to British Airways for three years. The Commission, however, doubted that Flybe would be able “to maintain and develop this business as a viable and active force,” and it considered the cession of these airport slots insufficient under the circumstances. On 27 February, the Commission therefore prohibited the acquisition.
Ryanair has vowed that it will appeal the Commission’s veto, which it characterized as a “political” decision to pander to the Irish Government, itself a 25% owner of Aer Lingus. In particular, Ryanair claims it is being held to a double-standard, and that its “unprecedented and revolutionary remedies package,” which involved fostering two new competitors and divesting flights on the 46 routes where the Commission had the greatest concern, went far beyond anything demanded of numerous comparable airline mergers the Commission had “rubberstamped”.
ECJ rejects EDF’s request to suspend deadline to decide whether to sell off power plant project
On 7 March 2013, the European Court of Justice (“ECJ”) rejected the application for interim measures by Électricité de France (“EDF”), which had sought to postpone its obligation to decide whether to sell or invest in a particular power plant project, as required by previous merger commitments. The ECJ ruled that the General Court had erred in analyzing the application, but nonetheless ruled the application did not justify a suspension.
This case stems from EDF’s 2009 acquisition of Belgian electricity company Segebel. In order to obtain Commission approval of the acquisition, EDF had committed to decide by 30 June 2012 either to invest in the Belgian Nest-Energie power plant project or to divest that project to a suitable purchaser.
EDF claimed in May 2012 that unforeseeable changes in the market made such a decision impossible in that timeframe and requested that the Commission grant an 18 month postponement of the decision until the end of 2014. The Commission instead granted a three-and-a-half month postponement, and EDF appealed to the General Court. Given the circumstances, it also sought interim measures to postpone the deadline until the General Court decided whether to annul the Commission’s decision altogether.
Under EU law, such interim measures will only be granted in situations where the harm faced by the applicant is both sufficiently serious and irreparable. The General Court had held in October 2012 that EDF had not provided the necessary information about its financial situation for the Court to determine whether the harm it faced was serious enough to warrant interim relief. The ECJ’s decision on 7 March ruled that this was in error: while such information is necessary where interim relief is sought because of the applicant’s financial situation, the case at hand concerned “the obligation to make a commercial choice within a period alleged to be disadvantageous” rather than a simple case of severe financial harm. In this context, the ECJ held, detailed financial information is useful but not required to assess the seriousness of the harm resulting from that obligation.
The ECJ thus proceeded to analyze EDF’s claims in detail and determine whether interim measures should be granted. It determined, however, that interim measures were not justified.
Chief among EDF’s concerns was that, if it would opt to sell off the Nest-Energie project, it risked doing so “at a loss.” The ECJ responded that the value of the project is what EDF could receive by divesting it, and thus the only “loss” would occur if it would have received more by waiting for the extended period it seeks – the end of 2014 – to make the sale. This, in turn, would depend on the market improving within that timeframe, which the ECJ regarded as too speculative to meet the definition of serious and irreparable harm justifying interim relief. Furthermore, the ECJ rejected the idea that the Commission, simply by refusing to extend the deadline for deciding whether or not to sell the project, was the “decisive cause” of what harm may result from having to make that decision.
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