Brussels: Europe and the Arabs

The European Commission has blocked, under the EU Merger Regulation, the proposed acquisition of Flugo Group Holdings AB ('eTraveli'), a Sweden-based company by Booking Holdings ('Booking'). It is a company based in the United States of America

A European Commission statement in Brussels said: “The acquisition would have allowed Booking to consolidate its dominant position in the market for hotel online travel agencies (“OTAs”) in the European Economic Area (“EEA”). The proposal submitted to the Commission did not provide adequate solutions to address this situation. Fears.

“Europe is a world-leading tourist destination attracting millions of travelers every year,” said Didier Reynders, European Commissioner for Justice. “The travel industry plays a vital role in the local economy of many regions, cities and rural areas. Booking’s acquisition of eTraveli will strengthen Booking’s dominant position in the market.” online travel agencies and will likely lead to higher costs for hotels and perhaps consumers. Our decision to block the merger means that hotels and European travelers will not be more limited in the options available to offer their services and book their travel. It also means that the drive for competitive pricing and innovation in this important segment will be maintained From the travel industry.

"Today's decision follows an in-depth investigation by the Commission into the deal, which would have brought together Booking and eTraveli, two leading providers of online travel services in a concentrated industry. Booking is the leading online hotel while eTraveli is one of the leading providers of aviation services," the Commission's statement said. Online in Europe Booking is also active in the meta search services (“MSS”) market primarily through its price comparison platform KAYAK.

Online travel agencies provide an important intermediation service, matching demand and supply for travel services, which include accommodation, flights, car rentals and tourist attractions. In the European Economic Area alone, online travel agencies handle transactions worth more than €100 billion annually. Hotel OTA services are the largest and most profitable sector of the OTA market and are worth approximately €40 billion annually.

During the investigation, Al Modha received feedback from a large number of stakeholders, including competing hotels and online travel agencies. Market participants were concerned that the deal would consolidate Booking's dominant position in the EEA hotel OTA market, reduce competition and increase prices for hotels and, potentially, for consumers.

The Commission found that the deal would have strengthened Booking's dominant position in the online hotel market, resulting in higher costs for hotels and, potentially, consumers. More specifically, the LT.AD found that:

Booking is the dominant online hotel in the EEA, which has been growing consistently over the past 10 years to reach a market share of over 60%. There is only one major competitor in the market, which is much smaller and mainly focused on the US market. Rival OTAs are unable to exert sufficient competitive pricing pressure on Booking and are therefore free to charge hotels higher commissions than some of their major competitors. Furthermore, Booking benefits from network effects as it has developed significant scale in its hotel offerings which in turn attracts a greater number of consumers.
The deal would have allowed Booking to have a major customer acquisition channel. After accommodation, online travel services are the second largest online market and the closest complement to Booking's core online travel business. OTAs are an important customer acquisition channel for hotel OTAs because they generate a significant amount of traffic and are often the first step in planning a trip. In the online aviation market, eTraveli is the best in class online airline and the number two player in the EEA. Booking could have leveraged eTraveli's capabilities to become Europe's premier online travel destination.
The deal would have allowed Booking to expand its travel services ecosystem, which revolves around its online hotel business. The online flights product is an important growth vehicle in this ecosystem because it will generate significant additional traffic to the Booking platform. This is because, among different online travel services, flights have the highest chance of leading to cross-selling of accommodations. This would have allowed Booking to capitalize on existing customer inertia because a large percentage of those additional consumers would have remained on Booking's platforms. Thus, this deal would have made it difficult for competitors to compete for Booking's position in the online hotel market.
By increasing traffic to and sales through Booking's platforms, the deal would have enhanced network effects and increased barriers to entry and expansion, making it difficult for competing OTAs to develop a customer base capable of supporting hotels' OTA businesses. . OTAs that are currently on a path to becoming full-fledged competitors may not be able to do so if the deal goes ahead.
Consolidating Booking's dominant position would have increased its bargaining position vis-à-vis hotels and shifted demand from cheaper sales channels to Booking. This could have resulted in higher costs for hotels, and possibly consumers.
Suggested treatments for reservation

The solutions provided by Booking did not adequately address the Commission's competition concerns 

It can be concluded that competition will be maintained on a permanent basis. The proposed reservation is for flight customers to be shown a selection screen on the flight check-out page, which is the page that appears to travelers after purchasing their flight tickets. On this selection screen, Booking displays multiple hotel deals from OTAs for competing hotels, allowing customers to click on the displayed offer to be redirected to it

OTA hotel website. The selection screen presented the following characteristics:

It would have been powered by KAYAK, Booking's meta search service ("MSS").
They would have been featured on the Booking.com-branded inflight platform and on the eTraveli-branded inflight platform. It was to be offered to flight customers based in the EEA and to flight customers located outside the EEA and traveling in the EEA.
It was going to show four hotel options offered by online travel agencies. The drop-down list that appears under each of the four hotel options may contain up to four additional OTA offers for the same hotel.
The recommended OTA, which appears first, would have been the OTA offering the lowest price for each hotel. It was possible to use the KAYAK algorithm to: (i) select the four hotels shown in the selection screen; and (2) select additional OTAs shown in the drop-down list for each accommodation. The KAYAK algorithm includes a bidding mechanism, which means that the booking will be rewarded by competitors for referrals from the selection screen.
Hotel OTAs may be offered provided they meet the following criteria: (1) compliance with KAYAK's technical and quality standards for online partners; and (2) generate at least 60% of gross lodging revenue from the sale of hotel rooms. Booking offers can also be viewed.
The Authority conducted a comprehensive analysis of the proposed obligations, including testing their effectiveness with relevant market participants. The comments received indicated that the proposed remedies were not sufficiently comprehensive and effective and did not completely eliminate the identified competition concerns. particularly:

The selection and classification of offers by OTAs at competing hotels was not sufficiently transparent and non-discriminatory, because KAYAK - a subsidiary of Booking - would have controlled many aspects of their implementation.
Offers from OTAs will be displayed at competing hotels only on the flight check-out page and not in other important cross-selling opportunities such as emails, notifications or other pages on the website. Furthermore, the flight check-out page represents only a small share of the cross-selling opportunities that Booking could have pursued with the eTraveli acquisition.
It was difficult to monitor commits effectively, especially since Kayak's algorithm acts as a black box.
Accordingly, the Commission found that the remedies provided by Booking were insufficient to address competition concerns and prevent the adverse competitive impact of the Transaction. As a result, the committee decided to block the proposed deal.

Companies and products

Headquartered in the United States, Booking operates online brands such as Booking.com, Rentalcars, Priceline and Agoda. In the European Economic Area, Booking is mainly engaged in the provision of online travel services to hotels under the Booking.com brand and, to a limited extent, in the provision of online travel services, which it acquires from eTraveli. Furthermore, Booking is active in providing MSS services for accommodation, car rentals and flights across its KAYAK business (including the brands KAYAK, Momondo, Cheapflights, HotelsCombined and others). Booking provides access to its online accommodation functionality, via affiliate merchant programs, to some competing online travel agencies that do not have the capacity to provide such services.

Headquartered in Sweden, eTraveli operates the online travel service through its Gotogate, My Trip, Seat24 and SuperSaver brands. eTraveli operates primarily as an online flight.

Merger control rules and procedures

The Commission was notified of the deal on October 10, 2022, and the Commission opened an in-depth investigation on November 16, 2022. On June 9, 2023, the Commission sent a statement of objections to the seizure.

The Commission has a duty to evaluate mergers and acquisitions involving companies whose turnover exceeds certain limits (see Article 1 of the Merger Regulation) or that have acquired jurisdiction by referral from Member States (see Articles 4(5) and 22 of the Merger Regulation) Merger Regulation ) and prevent concentrations that would significantly impede effective competition in the European Economic Area or any significant part thereof.

The vast majority of notified mergers do not pose competition issues and are liquidated after a routine review. From the moment the transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (first stage) or to initiate an in-depth investigation (second stage).

In the past ten years, the authority has approved nearly 3,500 mergers. The ban imposed today is the eleventh merger banned by the Commission during the same period.

There are currently four ongoing investigations into the Phase II merger