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Ryanair could be forced to sell its minority stake in rival Irish airline Aer Lingus following a decision by the UK Court of Appeal to allow competition authorities to investigate whether the shareholding is damaging competition.
The Office of Fair Trading began an inquiry in 2010 to determine if Ryanair’s purchase of a 29.8 per cent stake in Aer Lingus would lead to a substantial lessening in competition for consumers in the UK. It is investigating whether Ryanair can use its minority stake to influence the behaviour of Aer Lingus, thereby harming competition in the UK market where both airlines have substantial operations.
Ryanair challenged the decision to conduct the inquiry to the Court of Appeal, arguing the OFT had not begun its investigation within the required timeframe. On Tuesday the court rejected Ryanair’s appeal, enabling the competition investigation, which was suspended while the court challenge was heard, to resume.
The OFT welcomed the ruling, saying it would decide whether to refer Ryanair’s acquisition of the shares to the Competition Commission within 15 days.
The Competition Commission has the power to order companies to divest a minority stake if it finds they enable the owner to influence the behaviour and policies of a target company in a way that harms competition.
Ryanair said it would appeal the court’s ruling to the Supreme Court.
“Ryanair’s lawyers will immediately apply to appeal today’s ruling to the UK Supreme Court and will be seeking a suspension of any OFT investigation pending an outcome of this Supreme Court appeal,” said the company.
Ryanair began acquiring its 29.8 per cent stake in Aer Lingus in 2006 and made a bid to take over its smaller Irish rival later that year. The European Commission blocked the takeover bid in June 2007. However, it did not force Ryanair to dispose of its minority stake, saying it did not have de facto or de jure control in Aer Lingus.
Aer Lingus said it welcomed the court ruling and called for the Competition Commission to force Ryanair to sell its stake in the airline.
“It is unacceptable that our principal competitor has been allowed to remain as a significant shareholder on our share register even though the European Commission blocked their hostile takeover almost five years ago,” said Christoph Mueller, Aer Lingus chief executive.
In 2010 BSkyB was forced to sell 10 per cent of a 17.9 per cent minority stake that it held in ITV when the Competition Commission found the shareholding would give rise to a substantial lessening of competition.