MyTravel sues over Brussels block on merger

The tour operator MyTravel is suing the European Commission for more than £500m for blocking its £950m recommended takeover of First Choice in 1999.

If successful, the move would make legal history for being the first time a company has claimed damages from a competition authority in any of the 15 European member states.

MyTravel, formerly known as Airtours, was prompted to make the claim after a top European court overturned the 1999 ruling last summer. It is suing Brussels for £518m to cover three years' lost profits from First Choice, the loss of £35m of annual cost savings and abortive bid costs of some £10m. Details of the sum - more than double the figure initially estimated by MyTravel's lawyers - emerged from documents lodged yesterday with the Court of First Instance in Luxembourg.

Mario Monti, the EC's competition commissioner, blocked the deal on the grounds that merging the then Airtours with First Choice would give three operators "collective dominance" of the UK package holiday market. The others were Thomson and Thomas Cook.

Competition lawyers said the move was unprecedented. "The Commission has been burnt and rightly so for manhandling the case. It is a warning shot across their bows to be straighter in their approval or risk being out of pocket. The amount being contested is material," one competition expert said. Alec Burnside, a lawyer at Linklaters, said: "Given the biting criticism of the ruling there is clearly a case worth arguing. It's a high hurdle to get damages from the Commission but not an impossible one."

An EC spokeswoman said: "The Commission believes that it is not liable for the alleged damages and that the Court will conclude that the action must be rejected." The case is not expected to come to court for at least 18 months and a judgment could take several years.

In overturning Mr Monti's decision, the Court of First Instance said the regulators had failed to prove the deal would have "adverse effects" on the travel market.

The ignominy of having the original £950m deal blocked was compounded by MyTravel's near financial collapse. Despite completing a £1.3bn refinancing earlier this month, the group must still convince its convertible bondholders to defer their repayment date from next January to December 2006 if it is to survive.

The company reported a pre-tax loss of £618m for the first half of this year.