EU blocks Booking.com’s merger with flight technology company eTraveli
Under EU Merger Regulation rules, the European Commission on Monday (25 September) blocked the merger of Booking.com and eTraveli, citing the former’s already dominant market position.
Booking.com, an online accommodation and travel site, was set to takeover eTraveli, a flight-centric travel agency, in a deal worth €1.6 billion until the EU’s competition department put a stop to it.
Commissioner for Justice and Competition Didier Reynders said that following an investigation and considering Booking.com has a dominant position in the hotel online travel agency (OTA) in Europe, it would be “very dangerous to see such a dominant position increasing.”
Under the European Union’s Merger Regulation, the Commission can assess mergers and acquisitions in case of companies with a turnover above a certain threshold. It can block mergers that would prevent fair competition in the European Economic Area.
Booking.com is the leading hotel OTA in Europe, with a market share of more than 60%, and eTraveli is the second leading provider of OTA flight services. Through the merger, Booking.com could also become a top player in the flight OTA sector.
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The Commission’s reasons
According to the Commission’s press release, during the investigations, they received feedback from stakeholders that the transaction would expand Booking’s dominant position, reduce competition, and increase prices for hotels and consumers.
It also found the transaction would have allowed Booking to acquire a main customer acquisition channel. As flight OTA services are the second largest market after hotels, Booking could have leveraged eTraveli’s popularity to become the main flight OTA in Europe.
They also said the transaction would make it more difficult for competitors to contest Booking’s dominance of the hotel OTA market and would increase barriers to entry and expansion for other companies.
Booking suggested giving customers a choice screen on the page shown after purchasing the flight tickets. On such screens, Booking.com would display hotel offers from competing hotel OTAs, allow customers to click on the offer, and then be redirected to the hotel OTA’s website.
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The Commission thinks this would not cancel out the competition concerns, especially because a subsidiary of Booking.com called Kayak would have controlled aspects of the implementation. Kayak’s algorithm also works as a black box and, therefore would have been very difficult to monitor.
Moreover, the flight check-out page is only a small share of the cross-sell opportunities that Booking.com could have pursued. The rivalling hotel OTAs would not have been displayed in emails, notifications, or other website pages.
Therefore, the Commission said that Booking did not offer sufficient remedies to address these concerns.
“Our decision to block the merger means that European hotels and travellers will not be further limited in the options available to offer their services and book their trips. This also means that the drive for competitive prices and innovation will be preserved in this important part of the travel industry,” said Reynolds.
Kim van Sparrentak, the green MEP and rapporteur of the short-term rentals regulation, told Euractiv that “this is good news and a big change in competition law enforcement for digital markets.”
Van Sparrentak, who tried to strengthen the aforementioned regulation to put more constraints on the industry, added that she was “happy to see the tide is turning” regarding the reach of big tech.
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Marie Audren, director general of HOTREC, the umbrella Association of Hotels, Restaurants, Pubs and Cafes, said, “HOTREC has long been raising alarms about Booking.com’s market power and its impact on European hoteliers,” adding the association “will remain vigilant and strongly react to any business decisions that negatively impact SME hotels.”
Booking.com announced it would appeal the decision because the British Competition and Markets Authority and the American Federal Trade Commission cleared the deal and argued it would benefit consumers.
But divergence in rulings is not uncommon. Regarding the merger between Microsoft and Activision Blizzard, the EU said yes, while the UK and the US had concerns.
The decision “not only departs from settled law and precedent, but it deprives consumers of travel options that they are entitled to have,” said Booking Holdings’ Chief Executive Officer, Glenn Fogel.