Judges overturn Airtours merger veto

The deal will not be revived

The European Commission was wrong to stop UK travel company Airtours from buying its rival First Choice, a European court has ruled.

The ruling could rein in Europe's extensive powers over mergers and acquisitions

The Commission blocked the £850m buyout by Airtours, now renamed the My Travel group, because the Commission said it would create a "collective dominance" of the UK's short-haul leisure travel market.

But on Thursday the European Court of Justice allowed Airtours' appeal, saying that the Commission had failed to back up its case.

Both companies welcomed the decision for the clarity it might bring to European mergers, and although the deal - first minted in 1999 - is long dead and buried the court's move could reignite consolidation in the sector.

Out of order

Whatever happens to Europe's travel operators, the main import of the 67-page decision is its potential effects on Commission activities in the future.

The decision to block the takeover, in September 1999, was one of the first taken by Italian Mario Monti in his new job as Competition Commissioner.

Since then, Mr Monti has proved an activist, blocking deals as large as the US engineering merger between Honeywell and GE.

All that could change thanks to the court, which criticised the Commission for failing to prove its contention that the deal would produce a "collective dominance".

In competition parlance, "collective dominance" happens when two or three firms in a market are in a position to keep prices high without actually having to conspire to do so.

The case marks the first time the court has annulled an anti-trust decision since the Commission acquired its powers in 1990.

Opportunity

Michael Grenfell a competition lawyer at Norton Rose described the decision as "potentially a very significant finding".

Speaking on the BBC's World Business Report Mr Grenfell said companies may see the ruling as an opportunity.

"Companies... may feel that a loophole has been created and... perhaps a window of opportunity between now and if and when the legislation is changed for certain... deals to go through which might otherwise be blocked."