Ryanair Holdings Plc v The Office of Fair Trading & Anor

The duty of sincere cooperation between the European Union and its Member States may require a domestic competition authority to abstain from making a merger reference while related European proceedings remain subject to appeal. The duty extends beyond preventing inconsistent final decisions. It also prevents overlapping investigations where concurrent exercises of jurisdiction would be oppressive, mutually destructive or risk infringing the European Commission’s exclusive jurisdiction.

Where that duty prevents an earlier domestic reference because of the EC Merger Regulation 139/2004, section 122(4) of the Enterprise Act 2002 preserves the authority’s power to refer after the ordinary four-month period. The impediment continues until the European appeals have been finally determined and the time for any further appeal has expired.

Ryanair acquired a minority shareholding in Aer Lingus and made a bid for the remaining shares. The European Commission prohibited the proposed concentration, but concluded that it lacked power to require divestment of the minority holding. Ryanair and Aer Lingus brought related proceedings before the General Court, which dismissed both challenges in July 2010.

The Office of Fair Trading subsequently investigated whether the minority holding created a merger situation requiring a reference under section 22 of the Enterprise Act 2002. Ryanair contended that the ordinary four-month time limit had expired. The Competition Appeal Tribunal unanimously rejected that contention in [2011] CAT 23, holding that the duty of sincere cooperation had prevented an earlier reference and that section 122(4) preserved the reference power.

The central issue on appeal was whether the Office of Fair Trading could have made a domestic merger reference while the related European appeals remained pending.

1. Appeal dismissed. The Competition Appeal Tribunal was correct to hold that the Office of Fair Trading could not have made the proposed merger reference while the related European appeals remained pending, and that section 122(4) of the Enterprise Act 2002 therefore applied.

2. The duty of sincere cooperation extends beyond the avoidance of inconsistent final decisions. The European and domestic merger regimes involved intensive examination of substantially the same events. Concurrent investigations would have risked a clash of jurisdictions and would have been oppressive and mutually destructive. The Office of Fair Trading was therefore required to abstain from making a reference while that risk remained.

3. The authorities concerning stays of ordinary national court proceedings did not govern the statutory merger process. A court may permit preparatory steps and stay proceedings before reaching a conflicting decision. By contrast, the Enterprise Act 2002 imposed a strict timetable once a reference had been made and provided no point at which the Competition Commission’s process could be suspended. Extensive exercises of domestic jurisdiction would already have occurred before its final decision.

4. Either European appeal, if successful, could have produced an impermissible conflict. Success in Ryanair’s appeal would have confirmed the application of article 21 of the EC Merger Regulation 139/2004. Success in Aer Lingus’s appeal would have established the Commission’s jurisdiction over interim measures and the minority holding. The duty of sincere cooperation consequently continued until both appeals had been finally determined and the period for any further appeal had expired.

5. The direct impediment to a domestic reference was the duty of sincere cooperation, and that duty arose because of the Regulation, particularly article 21. The condition in section 122(4) was therefore satisfied. That provision was Parliament’s mechanism for preserving the possibility of a domestic reference pending final resolution of the European process; there was no need to read down or disapply other statutory provisions.

6. The court did not decide whether article 21 itself continued to exclude domestic jurisdiction until all appeal rights were exhausted. The Chancellor considered that construction strongly arguable but accepted the contrary proposition solely for the purposes of the appeal because the point had not been fully argued.

7. It remained possible that an interim order under section 72, expressly preserving the position pending the European proceedings, would accord with the duty of sincere cooperation. That possibility did not imply a power to make the substantive merger reference.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously. The court upheld the Competition Appeal Tribunal’s conclusion that the duty of sincere cooperation prevented an earlier domestic merger reference and that section 122(4) of the Enterprise Act 2002 preserved the reference power.

2. Competition Appeal Tribunal: In [2011] CAT 23, the Tribunal unanimously dismissed Ryanair’s application for a declaration that the time for a reference had expired. It held that the related European appeals created potential conflicts which the duty of sincere cooperation required the United Kingdom authorities to avoid.