The EU's Airtours veto was annulled in court — then Brussels approved bigger mergers

In 1999 the European Commission prohibited Airtours plc's takeover of First Choice, two of Britain's largest package-tour operators. The theory of harm was 'collective dominance': with First Choice gone, the remaining oligopolists — including Thomson, the biggest UK tour operator since 1974 — could coordinate on capacity and prices without any agreement. As the Commission's decision put it, it was sufficient that the merger made it rational for the oligopolists to act individually in ways that would substantially reduce competition between them.

Airtours took the case to the Court of First Instance (Case T-342/99), which in 2002 annulled the prohibition: the Commission had not conducted a sufficiently rigorous economic analysis of the incentives for, and ability to coordinate behaviour, and could not prove its theory to the required legal standard. Alongside the Schneider/Legrand and Tetra Laval reversals the same year, the defeat pushed the Commission into overhauling EU merger law in 2004.

The market paid no attention to the veto. Airtours' successor, renamed MyTravel, returned to profit in December 2006 for the first time since 2001, and in February 2007 agreed to merge with Thomas Cook; shares in MyTravel jumped 28.5% on the announcement and Brussels let the merger through.

Two months later the Commission cleared TUI — owner of Thomson — buying First Choice itself, conditioned only on selling the Irish agency Budget Travel. The combined TUI Travel would have 27 million customers and £12 billion of annual sales. The UK package-holiday market ended up with the two-giant structure the 1999 veto was supposed to prevent, assembled with the Commission's approval on each deed.

Three years of litigation and an annulled decision; the block failed to stop consolidation — Brussels cleared Thomson+First Choice and Thomas Cook+MyTravel in 2007

The theory of harm — collective dominance without any agreement — was new and unproven, and the court found the Commission's economic analysis too thin to sustain it.

The Commission read concentration as proof of coordination risk without demonstrating the theory's mechanisms: transparency, punishment of deviators, durability.

Blocking the Airtours–First Choice combination assumed the rest of the market would stand still; instead every other combination re-formed later, several with Brussels' own blessing.

Litigation risk was underpriced: losing in court cost the Commission credibility across three cases and forced a legislative rewrite.

A prohibition needs proof, not intuition: the EU could not show collective dominance would follow. And blocking one deal cannot freeze a market — the same consolidation arrived via other pairs.

The 2002 annulments gutted the Commission's merger record and drove the 2004 reform of EU merger law. Airtours never recovered its deal: renamed MyTravel, it cut costs until its first annual profit since 2001 (December 2006), then merged with Thomas Cook in February 2007. In June 2007 the Commission cleared TUI's purchase of First Choice — the firm it had shielded eight years earlier — requiring only the sale of Ireland's Budget Travel, creating TUI Travel with 27 million customers and £12 billion in sales.