52024M10615(02)

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Document 52024M10615(02)

Summary of Commission Decision of 25 September 2023 declaring a concentration incompatible with the internal market and the functioning of the EEA Agreement (Case M.10615 – BOOKING HOLDINGS / ETRAVELI GROUP) (notified under document number C(2023) 6376) – On 25 September 2023 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, and in particular Article 8(3) of that Regulation. A non-confidential version of the full Decision, as the case may be in the form of a provisional version, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: https://competition-cases.ec.europa.eu/comm/competition/index_en.html

C/2023/6376

OJ C, C/2024/3645, 10.6.2024, ELI: http://data.europa.eu/eli/C/2024/3645/oj (BG, ES, CS, DA, DE, ET, EL, EN, FR, GA, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)

ELI: http://data.europa.eu/eli/C/2024/3645/oj

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C/2024/3645

10.6.2024

Summary of Commission Decision

of 25 September 2023

declaring a concentration incompatible with the internal market and the functioning of the EEA Agreement

(Case M.10615 – BOOKING HOLDINGS / ETRAVELI GROUP)

(notified under document number C(2023) 6376)

(only the English version is authentic)

(C/2024/3645)

On 25 September 2023 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1) , and in particular Article 8(3) of that Regulation. A non-confidential version of the full Decision, as the case may be in the form of a provisional version, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: https://competition-cases.ec.europa.eu/comm/competition/index_en.html

1. THE PARTIES

(1)

Booking Holdings Inc. (United States, hereinafter ‘Booking’ or the ‘Notifying Party’) is a publicly listed company that operates online travel agency (‘OTA’) brands such as Booking.com, Rentalcars, Priceline and Agoda. In the EEA, Booking is mainly active in the provision of accommodation OTA services under the Booking.com brand. Booking is also active in the provision of metasearch services (‘MSS’) for accommodation, car rental and flights via its KAYAK business (which includes the brands KAYAK, Momondo, Cheapflights, HotelsCombined, among others) (2). Moreover, Booking provides access to its OTA accommodation functionalities, via commercial affiliated agreements, to certain rival OTAs that do not have the capability to offer such services.

(2)

Flugo Group Holdings AB (Sweden, hereinafter ‘Flugo’) is a Stockholm-based company that operates an OTA via its brands Gotogate, My Trip, Seat24 and SuperSaver. Flugo is primarily active as a flight OTA.

2. THE OPERATION

(3)

On 10 October 2022, following a referral pursuant to Article 4(5) of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’), the Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Booking intended to acquire sole control over certain activities of Flugo operating under the trading name ‘eTraveli Group’ (‘ETG’) by way of a purchase of shares (the ‘Transaction’). Booking and ETG are collectively referred to as the ‘Parties’.

(4)

The Transaction concerned the acquisition of sole control by Booking over ETG.

3. UNION DIMENSION

(5)

The Transaction does not have an EU dimension within the meaning of Article 1(2) of the Merger Regulation since ETG’s aggregate EU-wide turnover does not reach EUR 250 million. Nor does the Transaction have an EU dimension within the meaning of Article 1(3) of the Merger Regulation, since ETG does not achieve a turnover of more than EUR 25 million in at least three Member States.

(6)

However, the Transaction could have been reviewed under the national merger control laws of three Member States, namely Austria, Cyprus and Germany. On 14 February 2022, the Parties thus submitted a Form RS requesting that the case be referred to the Commission. No Member State objected to the request within the legal time limit and the request was accepted on 9 March 2022.

(7)

Therefore, the Transaction has a Union dimension pursuant to Article 4(5) of the Merger Regulation.

4. PROCEDURE

(8)

On 14 February 2022, the Parties requested the referral of the Transaction to the Commission on the basis of Article 4(5) of the Merger Regulation. On 9 March 2022, the request was accepted.

(9)

On 10 October 2022, the Commission received formal notification of the Transaction.

(10)

On 16 November 2022, the Commission found that the Transaction raised serious doubts as to its compatibility with the internal market and adopted a decision to initiate an in-depth investigation. The Notifying Party submitted its written comments to the Commission’s decision to initiate an in-depth investigation on 28 November 2022.

(11)

On 28 November 2022, the Commission, with the agreement of the Parties, extended the legal deadline by 15 working days under Article 10(3)(2) of the Merger Regulation.

(12)

On 16 December 2022, the Commission adopted two decisions pursuant to Article 11(3) of the Merger Regulation, suspending the merger review time limit due to the failure of the Parties to provide certain requested information. Overall, the suspension lasted from 8 December 2022 until 18 April 2023, the date on which the requested information were provided.

(13)

On 9 June 2023, the Commission adopted a Statement of Objections. The Notifying Party replied to the Statement of Objections on 24 June 2023. The Notifying Party requested to be heard at an oral hearing, which was held on 7 July 2023.

(14)

On 5 July 2023, the Notifying Party agreed to extend the timetable by 5 working days under Article 10(3) of the Merger Regulation.

(15)

On the basis of additional information from the Parties and third parties, the Commission sent four letters of facts to the Notifying Party. The first letter of facts was adopted on 13 July 2023 and the Notifying Party replied to this letter on 18 July 2023. The second letter of facts was adopted on 26 July 2023 and the Notifying Party replied on 8 August 2023. The third and fourth letters of facts were respectively adopted on 10 August 2023 and 23 August 2023 and the Notifying Party replied respectively on 17 August 2023 and 25 August 2023.

(16)

The Notifying Party submitted commitments on 31 July 2023 (the ‘Initial Commitments’). On 2 August 2023, the Commission launched a market test on the Initial Commitments.

(17)

On 24 August 2023, the Notifying Party submitted a revised set of commitments (the ‘Revised Commitments’).

(18)

The meeting with the Advisory Committee took place on 13 September 2023.

5. RELEVANT MARKETS

(19)

Booking and ETG both provide online intermediation services. However, while Booking acts primarily as an OTA for accommodation services (hotels and private accommodations) whereas ETG acts as an OTA for flight services.

(20)

The Commission considers that (i) flight and accommodation OTA services belong to two separate products markets. The Commission’s investigation confirms that there is no demand side substitutability between accommodation and flights OTA services. Moreover, there is limited supply side substitutability between these two services. In particular, not all accommodation OTAs are active or directly active as suppliers of flight OTAs services and vice versa. Indeed, OTAs tend to reach a level of specialization in one or more specific verticals.

(a) Hotel OTA services

(21)

The Commission considers that hotel OTA and private accommodation services constitute different product markets.

(22)

In the hotel OTA market, OTAs source content from hotels and sell it to consumers generally without taking any inventory risk. The hotel OTA market includes all OTAs that cater for hotel and provide intermediation services for hotels. Therefore, OTAs that do not provide services to hotels do not operate in the hotel OTA market, which point was confirmed by the Commission’s market investigation. In particular, (i) the barriers for OTAs to expand from private accommodation to hotels were considered high by market participants and (ii) on the end customer side, the demand profile of consumers that stay at hotels and private accommodation differ.

(23)

Hotel OTAs represent a specific sale channel for hotels and hotel remunerate them for their intermediation services. Hotels and OTAs are therefore in a vertical relationship and do not belong to the same market. Hotel OTAs enable hotels to reach customer segments that they would not otherwise be able to cover through their direct channels and offer a number of additional services compared to such direct sales channels.

(24)

The Commission considers that the hotel OTA market is EEA-wide as the main OTAs operate at the European, if not global, level.

(b) Flight OTA services

(25)

In the flight OTA market, OTAs source flight content from airlines and sell it to consumers. Flight OTAs act as intermediaries between airlines and consumers in a similar way as hotel OTAs on the hotel OTA market. The Commission considers that flight OTAs and airlines belong to distinct product markets. In particular, flight OTAs provide a different type of services than airlines and they represent a specific sales channel. OTAs provide marketing services and online booking functionality to a wide range of airlines, and provide search, compare and online booking services to consumers for one or more types of travel products from several airlines.

(26)

The Commission considers that the flight OTA market is EEA-wide as the main OTAs operate at the European, if not global, level.

6. COMPETITIVE ASSESSMENT

(27)

The Commission considers that the Transaction would strengthen Booking’s dominant position in the market for hotel OTA services, as a result of which effective competition would be significantly impeded in the internal market or in a substantial part of it.

(a) Dominance

(28)

The Commission considers that Booking holds a dominant position in the market for hotel OTAs in the EEA. Booking holds market shares above 60 % and materially increased its market share over the past 10 years. Booking only faces two sizeable competitors, Expedia and HRS, however with much smaller market shares. Expedia mainly focuses on the US market whereas HRS mainly serves business travellers and the German speaking countries in Europe.

(29)

The Commission’s market investigation also indicated that Booking.com has the highest commissions to hotels among the main OTAs, and appears to be unconstrained by competing OTAs, hotels, or end customers. Booking.com also benefits from network effects. Indeed, the attractiveness of an OTA for a customer depends on the number of hotels that the OTA is able to offer and vice versa Booking.com holds a significant advantage compared to its competitors since it has the largest hotel inventory among the main hotel OTAs in the EEA and, as such, is able to attract a large number of customers to its platform. Last, Booking enjoys a market position that is difficult to contest as a sizeable number of customers search for hotels solely on Booking.com (so-called ‘customer inertia’) and are attracted through online advertising, an area where Booking.com can outspend rivals. As a result, the Commission considers that barriers to entry and expansion in the hotel OTA market were high pre-Transaction.

(b) Strengthening of dominance and impact of the Transaction

(30)

First, the Transaction aimed at allowing Booking to expand its ecosystem of services by acquiring proprietary flight OTA capabilities and use these capabilities to increase sales of accommodation by cross-selling flights and hotel OTA services. The Commission’s investigation showed that flights are the second largest OTA market (after accommodations) and the closest complement to Booking’s core hotel OTA business. Flights also represent an important customer acquisition channel for OTAs as they generate a significant amount of traffic and are for many customers the first step of their trip journey.

(31)

ETG is a best-in-class flight OTA, the number two player in the EEA and is, pre-Transaction, on a growth path. Post-Transaction, Booking would be able to further leverage ETG’s capabilities to become the main flight OTA in Europe. Through its proprietary flight platform, Booking.com would acquire significant incremental traffic and reach customers earlier in their trip planning process as, in most cases, flights are booked before accommodations.

(32)

On that basis, the Transaction would allow Booking to expand its ecosystem of services as well as strengthen network effects and increase Booking’s ability to benefit from customer inertia. This would make it more difficult for competitors to contest Booking’s dominant position in the hotel OTA market in the future.

(33)

Second, the Transaction would also increase barriers to entry and expansion making it harder for competing OTAs to develop a customer base that could support a hotel OTA business.

(34)

Third, by increasing its market share in the hotel OTA market, Booking would further increase its bargaining position towards hotels and divert demand from cheaper sales channels to Booking, therefore increasing hotels’ costs. The Transaction may also result in higher prices for end-customers as the Commission’s investigation indicated that Booking is an expensive channel from which to source hotel OTA services.

(35)

Last, the Commission considers that the likely negative effects arising from the Transaction would not be outbalanced by the limited financial efficiencies claimed by the Notifying Party. The Commission considers that efficiencies would be unlikely to arise and, if so, would only benefit customers in the flight OTA market while the negative effect of the Transaction would arise in the hotel OTA market.

(36)

For the reasons mentioned above, the Commission considers that the Transaction would cause a significant impediment to effective competition as a result of Booking’s strengthening of a dominant position on the hotel OTA market in the EEA.

7. REMEDIES

(37)

In order to remove the competition concerns identified by the Commission, the Parties submitted the Initial Commitments on 31 July 2023, which were market tested by the Commission on 2 August 2023.

(38)

On 25 August 2023, Booking offered the Revised Commitments. The Revised Commitments were not market tested.

(a) Description

(39)

After the purchase of a flight on Booking’s website, Booking would display a choice screen that would contain accommodation offers from competing hotel OTAs. If customers clicked on an OTA name or icon, the customer would be re-directed to the hotel OTA’s website.

(40)

The Initial Commitments provided that the choice screen would only be displayed on the Booking.com branded flight platform and would be shown to customers located in the EEA. The Revised Commitments provided that the choice screen would be displayed on the Booking.com branded flight platform and on the flight platforms of ETG and ETG’s other brands. The Revised Commitments provided that the choice screen would instead be shown to all flight customers (whether located inside or outside the EEA) when purchasing a flight to an EEA destination.

(41)

The choice screen would display four accommodations options by up to four different recommended hotel OTAs. A drop-down menu appearing under each of the four accommodations options would contain four additional offerings from up to four different hotel OTAs for the same hotel. Under the Initial Commitments, the four accommodation options and the corresponding four recommended hotel OTAs would have been selected and ranked by the algorithm of Booking’s metasearch site KAYAK, provided that the four recommended hotel OTAs were different and affiliated with different corporate groups. The additional OTAs listed in the drop-down menus would have also been selected and ranked by KAYAK’s algorithm, with the same OTA (or OTAs affiliated with the same corporate group) possibly being listed in more than one drop-down menu.

(42)

Under the Revised Commitments, the recommended OTA for each of the four hotels shown in the choice screen would no longer be selected based on KAYAK’s algorithms. Instead, the recommended OTA would always be the OTA offering the lowest price for the hotels. However, the KAYAK algorithms (including the bidding mechanism) would still be used to: (i) select the four hotels displayed in the choice screen and (ii) select the additional OTAs displayed in the drop-down menu for each accommodation. Moreover, the Revised Commitments eliminated the requirement that the four recommended OTAs had to be different and affiliated with different corporate groups.

(43)

Hotel OTAs would be able to participate in the choice screen provided that they met the following criteria: (i) the OTA would comply with KAYAK’s usual technical and quality standards for OTA partners and (ii) at least 60 % of the OTA’s total accommodation revenue would be generated from the sale of hotel rooms. Booking.com itself was eligible to participate in the choice screen. Hotel OTAs (including Booking.com itself), would pay for referrals from the choice screen on the same terms as under their standard contracts for metasearch services with KAYAK. Booking and Kayak would enter into an arms’ length commercial affiliate agreement to implement the proposed commitments.

(44)

The Revised Commitments would be subject to an initial implementation period of up to three months and remain in effect for six years after the closing of the Transaction.

(45)

In the event that a hotel OTA, showing a sufficient legitimate interest, reasonably claimed that Booking and/or KAYAK would fail to comply with their obligations arising from the proposed commitments, the Revised Commitments provided for the application of a fast track dispute resolution procedure.

(b) Assessment

(46)

The Commission considered that the Initial Commitments were not sufficiently comprehensive and effective because their scope of application covered only a small share of the cross-selling mechanisms used by Booking.com and a small share of end customers impacted by the Transaction.

(47)

The selection criteria for the choice screen content and the eligibility requirements were also not sufficiently transparent and non-discriminatory, particularly because KAYAK – a subsidiary of Booking itself – would be in full control of several aspects of their implementation.

(48)

The Initial Commitments could not be effectively monitored.

(49)

As a result, the Commission considered that the Initial Commitments did not entirely eliminate the competition concerns raised by the Transaction.

(50)

The Revised Commitments only partially addressed some but not all of the shortcomings of the Initial Commitments. In addition, in certain aspects, the Revised Commitments were even less comprehensive than the Initial Commitments, and therefore raised additional issues as to their overall suitability to eliminate the competition concerns. Indeed, under the Revised Commitments Booking may feature as the only recommended OTA on the choice screen.

(51)

Therefore, the Revised Commitments did not eliminate the competition concerns identified entirely – also in light of the outcome of the Market Test of the Initial Commitments– and when compared to the Initial Commitments raised further issues as to their overall suitability.

(52)

In its decision, the Commission has, therefore, reached the conclusion that the Initial and Revised Commitments do not render the concentration compatible with the internal market and must be rejected.

8. CONCLUSION

(53)

Based on its analysis and available evidence, the Commission concludes that the Transaction is incompatible with the internal market and the functioning of the EEA agreement.

(1) OJ L 24, 29.1.2004, p. 1.

(2) MSS websites aggregate information in relation to one or more type of travel services. MSS provide, on the one hand, search and comparison services to consumers to allow them to compare offers for the same travel product made by a travel service provider (TSP) and/or by one or more OTAs. The customer experience on a MSS is as follows: the customer runs a search that is passed on to OTAs and TSPs; the MSS sorts the results; and, by clicking on the result, the customer is redirected to the website of the OTA or TSP offering the travel service.

ELI: http://data.europa.eu/eli/C/2024/3645/oj

ISSN 1977-091X (electronic edition)

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