Aer Lingus has asked the European Commission to consider ordering Ryanair to reduce its stake in the flag carrier, a Commission spokesman said.
Competition experts say the issue provides a test case of whether the European Union regulator has the power to order a company to reduce its stake in a rival which is a takeover target, and the outcome may have far-reaching implications.
"I can confirm we have received a notice about failure to act and we will reply by October 17th," Commission spokesman Jonathan Todd said.
The Commission, which has the exclusive power to regulate large mergers, blocked Ryanair's takeover bid for Aer Lingus in June, citing a threat to competition at Dublin airport, especially on routes to London.
At the time, the Brussels EU executive said it believed it did not have the legal competence to order Ryanair to reduce its 25 per cent stake in Aer Lingus.
Ryanair Holdings Plc, Europe's biggest low-cost airline, has since bought a further 4 per cent to bring its total holding in its rival to more than 29.4 per cent, close to the 30 per cent threshold which would trigger an obligation to launch an offer for the entire capital.
It has used its stake to try to force an extraordinary general meeting of shareholders to block plans by Aer Lingus to transfer valuable slots at London's Heathrow Airport from Shannon Airport to Belfast.
An Aer Lingus spokesman said: "It is true that Aer Lingus is in active discussions with the Commission but it would not be appropriate to comment further at this stage."
Ryanair has appealed against the Commission's veto of the merger to the EU Court of First Instance. A Ryanair spokeswoman said in response to the latest Aer Lingus move: "Given that the board of Aer Lingus has recently broken Irish company law by twice rejecting Ryanair's request for an EGM, it would be impossible for Aer Lingus to claim that we have any influence or control over Aer Lingus."
She also noted Air Lingus' share price had fallen to €2.35 compared to Ryanair's offer of €2.80, which the flag carrier rejected almost a year ago.