'Super-Mario's' wings are clipped

BRUSSELS monopoly buster Mario Monti was humiliated today by a historic European Court judgment overturning his decision to block Airtours' £850m takeover of First Choice. The judges stamped all over 'Super-Mario's' decision to block the merger plan in a statement that drastically clipped the watchdog's wings.

Although the two package tour groups no longer want to merge, lawyers were poring over the judgment to see if it would clear the decks for billions of pounds worth of other mergers blocked by Monti's department.

After halting the Airtours deal on his first day in office three years ago, Monti went on to stop the attempted mega-mergers of Sprint and Worldcom, GE and Honeywell, electronics groups Schneider and Legrand and packaging companies Tetra Laval and Sidel. He also put the kibosh on EMI's proposed merger with Time Warner.

The Court of First Instance in Luxembourg found that on three significant counts the Commission had ridden roughshod over requirements to prove that a combined Airtours-First Choice would damage competition. However, in what could be a crucial compromise, the judges did not completely ban Monti's use of the 'collective dominance' theory. This says competition can be damaged not just by the creation of one overwhelming monopolist, but by a reduction in the number of rivals - an oligopoly.

A First Choice-Airtours merger would have cut the number of UK short-haul package tour operators from four to three. The Court declared Monti's department had failed to prove that:

the deal would mean the remaining companies would more easily be able to observe and copy each other's products and prices.

if one of them had refused to play ball on price or product fixing, the other two had ways to retaliate.

smaller competitors could not act as a brake to anti-competitive practices by the Big Three by offering better deals.

Simon Holmes, partner of law firm SJ Berwin's EU and competition department, said: 'This means the Commission must be much more careful in future.'

Tim Byrne, chief executive of MyTravel, the new name for Airtours, welcomed the decision for bringing clarity to a complex legal situation. Airtours is thought to have spent about £2m on the appeal, which it brought on an issue of principle.