OFT rules against Ryanair on Aer Lingus stake

(Reuters) - Office of Fair Trading (OFT) on Friday ruled that Ryanair's ownership of a minority stake in Irish rival Aer Lingus threatened competition in the British market and asked the Competition Commission to consider sanctions.

The Competition Commission, unlike the OFT, has the power to force Ryanair to divest its stake.

Ryanair would face a significant loss as Aer Lingus' share price is less than half the level it was when it began building up its stake.

Ryanair mounted a public takeover for all of Aer Lingus in October 2006, but the European Commission investigated the bid and decided to prohibit it in June 2007.

The commission ruled, however, that Ryanair could not be forced to sell its stake, since Ryanair did not have de facto or de jure control of Aer Lingus.

The OFT ruling said there was a realistic prospect that Ryanair's 29.8 percent holding in Aer Lingus would result in a "substantial lessening of competition" on air routes between Britain and Ireland.

"We are concerned that Ryanair's shareholding places it in a position to influence the commercial policy and strategy of Aer Lingus in a number of different ways that could dampen competition," OFT chief economist Amelia Fletcher said in a statement.

It dismissed Ryanair's assertion that the probe was "out of time" due to the fact it began to build up its stake in 2006.

Ryanair described the probe as a "waste of public time and resources" and said it expected the Competition Commission will rule in its favour.

(Reporting by Conor Humphries; editing by Jason Neely)