Ryanair refused permission to appeal to Supreme Court over Aer Lingus divestiture order

The Competition and Markets Authority – previously the Competition Commission (CC) – had directed Ryanair to reduce its holding in Aer Lingus from 29.82 per cent to 5 per cent on the grounds that by Ryanair holding such a large stake it would prevent Aer Lingus from entering into merger talks or other form of combination with another airline, and cause a “substantial lessening of competition” on routes between Great Britain and Ireland.

The legal issues related to where the CMA orders divestiture of shares to remedy a substantial lessening of competition (SLC) that divestiture may remove any possibility – as opposed to probability – of that SLC occurring.

In addition it concerned whether Ryanair was a victim of “procedural unfairness” or whether the CMA’s direction for divestiture breaches the duty of “sincere cooperation” in Article 4(3) of the Treaty on European Union(TEU).

Ryanair challenged the decision of the CC, arguing that it was “procedurally unfair” for the regulator to have refused to disclose to its external lawyers the material allegations and evidence it relied upon in reaching the conclusion that Ryanair might affect Aer Lingus’s ability to participate in a combination with another airline.

It was also submitted that the divestiture remedy was “disproportionate” and was imposed by the CC on the basis of a misdirection as to the degree of risk of an SLC occurring that has to be found before a remedy can be imposed and which dictates the type of remedy required.

The Competition Appeal Tribunal (CAT) rejected all of these challenges to the findings of the regulator and the divestiture order.

Ryanair then appealed to the Court of Appeal of England and Wales, which held that the CAT decision disclosed “no error of principle”.

“The non-disclosure of the names of the other airlines did not make the consultation process procedurally unfair to Ryanair,” it said.

It challenged the CC’s determination that a divestiture of all but 5 per cent of the minority stake was the only remedy effective to remove or prevent an SLC, but the Court of Appeal ruled that the order satisfied the “legitimate aim” of the Act and was “neither ultra vires nor disproportionate”.

Ryanair further contended that the decision to require divestiture of all but 5 per cent of the minority stake involved a breach of the duty of sincere co-operation under Article 4(3) TEU because of a “material risk of conflict” between the order and a future decision of the European Commission, following the appeal to the General Court, that Ryanair should be permitted to bid for 100 per cent of Aer Lingus.

It sought a referral to the European Court of Justice, but the Court of Appeal observed that the clear objective of Council Regulation 139/2004 (EUMR) was to “promote competition”.

The judgment stated: “Mergers which do not have an adverse effect on competition are therefore pro tanto compatible with a common market based on the principle of competition.”

The court held that the CAT was therefore right to reject this challenge to the divestiture order and aw no need to refer this question to the ECJ.

Ryanair sought permission to appeal the decision to the Supreme Court, but a panel of three justices refused the application following a review of the relevant written submissions, meaning that the Court of Appeal judgment stands.

The Supreme Court’s Order stated: “The court ordered that permission to appeal be refused because the application does not raise a point of law of general public importance which ought to be considered by the Supreme Court at this time bearing in mind that the case has already been the subject of judicial decision and reviewed on appeal.”