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Ruling set to spark mega-mergers

The floodgates could be opened to more consolidation in financial services following a ruling that the EU Comm-ission was wrong to block the merger between Airtours and First Choice.

Last week&#39s decision by the Court of First Instance comes as a slap in the face for EU internal markets commissioner Mario Monti and could pave the way for mega-mergers among UK financial services firms.

The merger of the two UK holiday firms would have given them a market share of 34 per cent.

A proposed merger of Abbey National and LloydsTSB was blocked under UK merger rules last year but lawyers say the European decision is likely to affect the climate of rulings in the UK.

The EU is set to move away from its current definition of collective dominance or “oligopoly” to a looser US-style arrangement.

Osborne Clarke banking partner Patrick Cook says: “Ultimately, the court&#39s decision means the chances of mergers have been enhanced. The EU is changing its merger policy anyway to move away from the principle of collective dominance to one of a substantial lessening of competition.”

Syndaxi principal Robert Reid says: “We are undoubtedly going to see more mergers, particularly with the life companies.

“There could be less choice which could lead to less competitiveness but I think competition is going to come from IFAs with wrapped products rather than from the product providers.”

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