The European Commission prohibits the acquisition of eTraveli by Booking

European Union
The Commission considers Booking’s proposed commitments insufficient.
The European Commission prohibits the acquisition of eTraveli by Booking
November 23, 2023

In its decision of September 25, 2023, the European Commission prohibited the acquisition of eTraveli by Booking—both of them active in the online travel agency market. The Commission considered that Booking’s proposed remedies were not sufficiently effective. This prohibition is the eleventh merger that the Commission has blocked in the last decade.

The proposed transaction

On October 10, 2022, the European Commission received a notification of a concentration in the market for online travel agencies (“OTAs”), by which U.S. company Booking Holdings Inc. (“Booking”) would acquire exclusive control of the Swedish company Flugo Group Holdings AB (“eTraveli”).

OTAs are online platforms that allow consumers to search for and book travel products and services directly with suppliers, including booking hotels, flights, cars and tours. Within this sector, Booking is mainly focused on hotel accommodation (“hotel OTAs”), although it also provides other services such as flight booking and price comparison through its KAYAK platform.

eTraveli is a leading flight agency (“flight OTAs”). Therefore, although specialized in different areas, both companies provide online travel agency services.

The Commission’s objections and Booking’s commitments

After analyzing the notification, the European Commission had doubts as to the compatibility of the concentration with the internal market. Therefore, it opened a second phase investigation to determine whether the concentration could significantly impede effective competition.

The European Commission preliminary concluded that (i) Booking held a dominant position in the hotel OTA market in the European Economic Area (EEA); (ii) the acquisition of eTraveli would strengthen that position, increasing market entry barriers and the number of users of Booking’s platforms; and (iii) this set of elements would result in a decrease in the bargaining position of hotels to maintain their costs with respect to Booking’s services, ultimately harming consumers.

In response to these objections, Booking offered a series of remedies. In particular, it proposed to display (on both operators’ online flight sales platforms) accommodation offers made by competing OTAs. Thus:

  • The flight check-out page would show up to four hotel offers.
  • Booking platform KAYAK would select competing OTAs’ offers.
  •  The offers would be selected based on the price and other technical, quality and minimum revenue requirements.

The European Commission’s decision

Despite the commitments submitted by Booking, on September 25, 2023, the European Commission finally decided to prohibit the transaction, concluding the following:

  • Booking is the dominant hotel OTA in the EEA, with a market share above 60%.
  • The transaction would have allowed Booking to acquire a main customer acquisition channel (eTraveli’s flight OTA), the second largest flight sales channel in the EEA.
  • The transaction would have allowed Booking to expand its travel services ecosystem, increasing its share because a significant part of flight OTA customers would have stayed on Booking’s platforms after purchasing their flights to acquire other services.
  • The growth in sales and customers would have reinforced network effects and increased barriers to entry and expansion faced by competing hotel OTAs.
  • In short, the transaction would have strengthened Booking’s dominant position, weakening the offers from cheaper sales channels. All this would have resulted in higher costs for hotels and, ultimately, for consumers.

The Commission concluded that the proposed commitments did not eliminate entirely the identified competition concerns. In particular: (i) the fact that KAYAK is a subsidiary of Booking made it impossible to ensure a sufficiently transparent and non-discriminatory selection of offers; and (ii) displaying the offers on the check-out page was not sufficient to ensure effective competition, as these pages represent a small share of total cross-selling, there being other equally relevant sources such as notifications, mailings and other pages of Booking’s website. As a result, the Commission prohibited the transaction.

In recent years, the European Commission has adopted a more cautious approach to merger assessment. In the last decade, it has cleared 61 second-phase transactions (of which 48 were with commitments) and prohibited 11: UPS/TNT Express (2013), Ryanair/AER Lingus III (2013), Hutchinson 3G UK/Telefónica UK (2016), Deutsche Börse / London Stock Exchange Group (2017), Heidelbergcement / Schwenk / CEMEX Hungary / CEMEX Croatia (2017), Wieland / Aurubis Rolled Products / Schwermetall (2019), Siemens / Alstom (2019), Tata Steel / Thyssenkrupp / JV (2019), Hyundai Heavy Industries Holdings / Daewoo Shipbuilding & Marine Engineering (2022), Illumina/Grail (2022), which we analyzed in this blog (here and here), and finally, Booking Holdings / eTraveli Group.

The European Commission is currently undergoing a second-phase analysis of several transactions in the digital and technology field: the joint venture between Orange and MásMóvil, the proposed acquisition of iRobot by Amazon, and Adobe’s proposed acquisition of Figma (known for its web and app interface design software).

November 23, 2023