But the ECJ in Luxembourg said the EU Commission had not acted unfairly.
Mrs Merkel wants to harden the text with new sanctions for those who ignore ECJ rulings.
But the ECJ says the amount is not open-ended and member states can set an upper limit.
The ECJ says "the point at which the temporary incapacity arose is irrelevant".
The ECJ decision meant that subscribers in European member states were entitled to access broadcast signals from other member states.
"In my view the ECJ has held that the object of such agreements is to restrict competition, " said the judge.
Her case had been referred to the ECJ by the Dublin Metropolitan District Court, which had sought clarification of EU law.
The ECJ ruling on Thursday said an Irish court must decide the amount of compensation to which Ms McDonagh is entitled.
The ECJ has also ruled that the long-term sick have the right to accumulate at least a year of unused annual leave.
In March last year, the ECJ ruled that it was no longer legal for insurers to charge different prices depending on gender.
The ECJ held that clauses banning the use of foreign decoders and smart cards were void and amounted to a restriction on competition.
An EU source told the BBC that the ECJ ruling has full, immediate effect EU-wide, regardless of the type or size of employer.
In February, an ECJ advocate general said this was in line with the aims of the EU single market - a border-free zone for goods and services.
The passenger is entitled to "reimbursement of the amounts which proved necessary, appropriate and reasonable to make up for the shortcomings of the air carrier", the ECJ said.
Commenting on Thursday's ruling the Confederation of British Industry said that "as a result of earlier ECJ judgments, this change has already happened in the UK, bringing along headaches for employers".
According to an earlier ECJ ruling, workers who fall sick before a period of annual leave can also reschedule that leave period so that it does not clash with their sick leave.
The EU regulation on passenger rights "does not provide for any limitation, either temporal or monetary, of the obligation to provide care to passengers whose flight is cancelled due to extraordinary circumstances", the ECJ said.
Although the article's focus was on obscure courts created by the North American Free Trade Agreement (NAFTA), a similar interference in our jurisprudence is predictable as the European Court of Justice (ECJ) flexes its muscle.
The UK's Federation of Small Businesses urged the UK government on Thursday to "avoid implementation of any ECJ ruling on annual leave and sick leave for as long as possible, given the ongoing negotiations by the social partners on the Working Time Directive".
应用推荐