This essay examines the theoretical background and the practical application of the EU's “antitrust policy”. As mergers are one way for firms to gain a “dominant position” in the market, the Commissionapplies the merger regulation to control such developments. The operation of this policy is analysed with the case study of a prohibited merger of “Ryan Air” and “Aer Lingus”. The case also shows the high degree of legislative and executive powers the EU-institutions have gained in the significant economic area of competition policy.
Although seemingly of purely economic purposes, EU competition policy serves “integrative” purposes too. “EU-Integration” can be defined as the EU-Member States voluntarily foregoing their power to formulate only national political and legal measures. Instead they formulate common policies which are determined in a coop-erative process of decision making. Cooperation can either take place in an intergovernmental framework or by transferring national sovereignty to the EU-institutions with the subsequent subjugation of national law under EU Law. Since the Treaty of Rome in 1957 expressed the determination of the European Economic Community’s Member States to build an “ever closer union”, economic integration parented EU-integration. With the new Treaties from the Single European Act onwards other than economic policies were added to the EU’s agenda, e.g. cultural policy, foreign or security policy, but economic integration stayed a top priority. The EU’s success is still believed to depend on its economic success and its ability to let the majority of the EU’s citizens profit from it. Economic failure could undermine people’s acceptance of the renunciation of national political independence. Therefore the Commission strives to ensure the Single Market’s success, among other things by applying a competition policy with merger controls.
Table of Contents
1. Introduction
2. Applying merger control policy - The case of Ryan Air and Aer Lingus
2.1. Background of the case
2.2. Reasons for the merger coming under EU jurisdiction
2.2.1. Legal framework
2.2.2. The definition of a “merger”
2.2.3. The “Community Dimension”
2.3. The Commission’s reasons for prohibiting the merger
2.3.1. Theoretical background
2.3.2. The Commission’s decision
2.3.2.1. Definition of the market
2.3.2.2. The merger’s effects on competition
2.3.2.3. Barriers to other firms’ market entry
2.3.2.4. Added efficiency
2.3.3. Possible amendments
2.4. Special problems of this merger case
3. Conclusion
Objectives and Topics
This study examines the theoretical foundations and practical application of European Union antitrust policy, using the prohibited merger attempt between Ryan Air and Aer Lingus as a central case study to illustrate the power of EU institutions in maintaining market competition.
- The theoretical and legal framework of EU merger control.
- The definition and jurisdiction of mergers with "Community Dimension".
- The European Commission’s investigative methodology and decision-making criteria.
- Evaluation of market definitions, competitive effects, and potential efficiencies in the airline industry.
- The significance of this case as a demonstration of EU-integration through economic regulation.
Excerpt from the Book
2.3.2.1. Definition of the market
The Commission defined the overlapping city-to-city routes as a self-standing market (Gadas, et al., 2007 p. 66) because customers who wanted to travel between these destinations could hardly avoid using airline services. Therefore the customers’ demand and the firms’ offer of airline services create a self standing market. As the only airlines operating these routes on a large scale, Ryan Air and Aer Lingus were already dominant in this market.
Ryan Air’s argument that it had its prices set not by competing with Aer Lingus’ prices but by “consumers’ overall discretionary spending” implied that consumers could substitute the air services anytime if prices were increased. In practice, however, substituting one route by another was not possible because other routes as short and convenient were not supplied by other airlines. Also, consumers could not be supposed to stay at home or to use indirect (much longer) flights or other means of transport (railways, ships etc.) for longer distances as adequate substitutes. The investigation had also shown that both airlines monitored each others’ prices with special software, adjusting their prices to each other. So their prices were influenced by their being competitors to each other (Gadas, et al., 2007 pp. 68-69).
Ryan Air argued that, because it mostly operated from smaller airports while Aer Lingus mostly operated from bigger cities’ airports, the routes had to be defined as airport-to-airport instead of city-to-city connections. This would have resulted in fewer overlapping routes. The Commission found that customers picked flights not by the airport but by city of departure and arrival; therefore the argument was rejected (Gadas, cit. loc.). As both airlines themselves did not differentiate between time sensitive and other passengers but offered flights at a chosen schedule at the same price for every passenger (“take it or leave it” principle) the Commission saw no cause to differentiate the market by “kind of passengers” either (Gadas, et al., 2007 p. 67).
Summary of Chapters
1. Introduction: This chapter introduces the theoretical background of EU antitrust policy and sets the stage for the case study on the prohibited merger of Ryan Air and Aer Lingus.
2. Applying merger control policy - The case of Ryan Air and Aer Lingus: This section provides an in-depth analysis of the legal, theoretical, and practical aspects of the merger case, covering jurisdiction, market definition, and the reasons for the Commission's final prohibition.
3. Conclusion: The concluding chapter summarizes the impact of the Commission's decision and highlights the case as an indicator of the progress of EU economic integration and the executive power of its institutions.
Keywords
European Union, Antitrust Policy, Merger Control, Ryan Air, Aer Lingus, European Commission, Competition, Single Market, Economic Integration, Market Definition, Dominant Position, Consumer Protection, Airline Industry, Community Dimension, Competition Law.
Frequently Asked Questions
What is the primary focus of this academic work?
The work focuses on the application of EU competition law, specifically investigating how the European Commission evaluates and controls mergers between large corporations to prevent market distortion.
Which central topics are analyzed in the text?
Central topics include the legal frameworks of the EEC/EU, the theoretical approaches to competition (constructivist vs. evolutionary), the criteria for defining relevant markets, and the assessment of potential consumer harm.
What is the main objective or research question?
The research examines the effectiveness of EU merger control mechanisms by analyzing why the proposed merger of two specific airlines was prohibited and what this implies for the EU's role in the internal market.
Which scientific method is applied?
The study utilizes a case study methodology, drawing on legal documents, economic theory, and the Commission's own investigative practices to provide a comprehensive analysis of the regulatory decision-making process.
What content is covered in the main section?
The main section details the background of the Ryan Air and Aer Lingus case, the Commission’s jurisdiction, its definitions of market competition, the effects of the merger, and an analysis of why the proposed remedies were rejected.
Which keywords characterize this paper?
The paper is characterized by terms such as antitrust policy, merger control, Community Dimension, market equilibrium, economies of scale, and the evolutionary approach to competition.
Why did the Commission reject the proposed remedies from Ryan Air?
The Commission found the remedies insufficient because they would not have triggered enough effective competition to compensate for the loss of Aer Lingus as an independent competitor and faced significant implementation hurdles.
How does the case reflect the progress of EU integration?
The case serves as an indicator of EU-wide economic integration, demonstrating the transfer of significant legislative and executive powers from national authorities to supranational EU institutions in the field of competition policy.
- Citation du texte
- Andrea Daniel (Auteur), 2009, A merger that did not come to pass, Munich, GRIN Verlag, https://www.grin.com/document/131484
