The European Commission has blocked the acquisition of air booking specialist eTraveli by Booking Holdings, under the EU Merger Regulation, as the merger would have allowed Booking to strengthen its dominant position on the market for hotel online travel agencies (OTAs).
In 2021, Booking announced it had an agreement to acquire eTraveli for €1.63 billion, subject to regulatory approval. The transaction was notified to the Commission on 10 October 2022, which opened an in-depth investigation on 16 November 2022.
During the investigation, the Commission received feedback from a large number of stakeholders, including hotels and competing OTAs. Market participants were concerned that the transaction would strengthen Booking’s dominant position on the market for hotel OTAs in the European Economic Area (EEA), reduce competition and increase prices for hotels and, possibly, for consumers. Moreover, the investigation found that Booking did not offer remedies that were sufficient to address these concerns.
Booking’s acquisition of eTraveli would strengthen Booking’s dominant position in the online travel agencies market and likely lead to higher costs for hotels and, possibly, consumers.Didier Reynders, European Commissioner for Justice
“Europe is a world-leading tourism destination attracting millions of travellers every year. The travel industry plays a vital role for the local economy of many regions, cities, and rural areas. (…) 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”, argued Didier Reynders, Commissioner for Justice.
The Commission found that Booking is the dominant hotel OTA in the EEA, which has been consistently growing over the past ten years to reach a market share above 60%. There is only one sizeable competitor in the market, which is however much smaller and mainly focused on the US market. Rival OTAs are not able to exert sufficient competitive price pressure on Booking, which is thus free to charge higher commissions to hotels than some of its main competitors. Moreover, Booking benefits from network effects as it has developed a significant scale in its hotel offering that, in turn, attracts an ever larger number of consumers.
On the flight OTA market, eTraveli is a best-in-class and the number two player in the EEA. Booking could have leveraged eTraveli’s capabilities to become the main flight OTA in Europe.European Commission
The transaction would have allowed Booking to expand its travel services ecosystem, which revolves around its hotel OTA business. A flight OTA product is a crucial growth avenue in this ecosystem as it would generate significant additional traffic to Booking’s platform. This is because, among the different travel OTA services, flights have the highest chance to lead to the cross-selling of accommodation. These would have allowed Booking to benefit from existing customer inertia because a significant share of these additional consumers would have stayed on Booking’s platforms. Therefore, the transaction would have made it more difficult for competitors to contest Booking’s position in the hotel OTA market.
2. Insufficient remedies
Booking proposed to show flight customers a choice screen on the flight check-out page, offering to display multiple hotel offers from competing hotel OTAs, allowing customers clicking on the displayed offer to be redirected to the hotel OTA’s website.
However, the Commission found this solution was not sufficiently comprehensive and effective and did not eliminate entirely the identified competition concerns since the selection and ranking of offers by competing hotel OTAs were not sufficiently transparent and non-discriminatory, because KAYAK, a subsidiary of Booking, would have been in control of several aspects of their implementation.
Moreover, the offers from competing hotel OTAs would have been displayed only on the flight check-out page and not in other important cross-sell opportunities such as emails, notifications, or other pages of the website.
3. European hospitality industry welcomes the decision
HOTREC, the association representing the European hospitality sector, has welcomed and commended the decision.
HOTREC has long been raising alarms about Booking’s market power and its impact on European hoteliers. (…) HOTREC will remain vigilant and strongly react to any business decisions that negatively impact SME hotels.Marie Audren, HOTREC Director General
European hoteliers are faced daily with the unfair behaviour of powerful OTAs, the association highlighted in a statement. A HOTREC distribution study shows that more than half of hoteliers (55%) “feel pressured by OTAs to accept platforms terms and conditions (e.g., regarding cancellation policy, special discounts) that hotels would otherwise voluntarily not offer.”
“While today’s decision is important from a competition enforcement point of view, HOTREC also recalls important strides forward on a legislative front with the implementation of the Digital Markets Act (DMA)”, HOTREC said. “The law represents an important milestone for the hotel industry since it will also introduce a ban on all price parity clauses, which prevent hoteliers from offering a better price on their own channels than the platform. Additionally, it will provide business users with better access to the data generated by their listings.”
In a statement responding to the decision, Booking has revealed it not only plans to appeal the decision, but has also accused the Commission of acting unlawfully, arguing that the deal would, in fact, foster competition and “promote consumer welfare”.
“The European Commission’s decision not only departs from settled law and precedent but it deprives consumers of travel options that they are entitled to have”, Booking Holdings’ Chief Executive Officer Glenn Fogel said in a statement.
The company pointed out that that the merger has already been approved in the US and UK and accused the Commission of using “misleading” and “selective” data, leading to arguments that were “contrary to both EU merger regulation and established case law”.
Lastly, Booking highlighted that, according to their official calculations, the acquisition of eTraveli would only increase their market share by 1% to 3% by 2026, which is “insignificant and unlikely to result in any significant harm to competition”.