Days after a US federal court refused to oppose Saber’s $ 360 million acquisition of rival Farelogix, the UK Competition and Markets Authority blocked the merger on the grounds that it would stifle the and competition.
“We recognize that our decision in this investigation comes at a time of uncertainty and disruption in the global travel industry due to the COVID-19 pandemic,” said Martin Coleman, chair of the investigative group for the UK competition agency in a statement. “It remains important to protect the competition between companies that provide services to airlines and the benefits that such competition can bring to airlines and passengers. We never make decisions to block mergers lightly and in this case the evidence of harm is clear. “
A spokesperson for Saber, responding to the decision, said the company will reflect on its next steps.
“We are disappointed with the CMA’s findings, particularly in light of the US Federal Court decision which concluded that Saber’s acquisition of Farelogix is not anti-competitive and should not be prohibited”, said Saber spokesperson. “We are reviewing the findings of the CMA and will carefully consider our options.”
Prior to the April 7 decision in the United States, Saber’s legal team urged the Delaware federal court to hasten a decision on the competition dispute between Saber and the United States Department of Justice, as the British decision was due this week. Saber argued – it turns out wrongly – that the United Kingdom was unlikely to oppose an American court ruling favorable to Saber, in particular because Farelogix’s business is relatively small in the United States. United Kingdom.
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The UK competition authority has looked at this from a different perspective than the United States Department of Justice, which opposed the merger as anti-competitive, and the United States Federal Court in part because the British agency assessed the impact for British consumers only.
The UK market authority has found that Saber’s proposed acquisition of Farelogix would reduce competition, as the two companies are investing heavily in the development of ancillary airline services to distribute to travel agencies, and it is unlikely that Saber continue to develop its own solutions if the agreement is reached. These optional services for airline passengers include the possibility of purchasing seats with more legroom in advance, Wi-Fi and meals, for example.
“Following its in-depth” Phase 2 “investigation, the French Competition and Markets Authority (CMA) found that the purchase of Farelogix by Saber could lead to less innovation in their services, leading to less new features that could be released more slowly, “The UK competition authority said. “The fees for certain products may also increase. As a result, British airlines, travel agencies and passengers would be worse off. “
The UK competition authority has found that “airlines, and ultimately their passengers, will lose both this lack of innovation and insufficient competition among other companies in the market”.
In addition to developing airline auxiliary service solutions for distribution to third parties, Saber and Farelogix provide connectivity to travel agencies, including large travel management companies. The UK competition agency has found that Farelogix offers airlines an attractive connectivity alternative to Saber.
“The CMA believes that Farelogix’s continued independence will likely help motivate Saber to innovate further, providing airlines with more choices when it comes to connecting with travel agencies, which will allow additional tickets and products be sold by travel agencies in a more innovative way, ”said the authority.
The British decision leaves Saber’s proposed acquisition of Farelogix suspended as a question mark. The United States Department of Justice still has the opportunity to appeal the April 7 negative decision of the Delaware District Court for the United States.
Reacting to the Delaware decision, Deputy Attorney General Makan Delrahim said Wednesday: “” At trial, the antitrust division argued that Saber’s acquisition of Farelogix would remove a critical constraint on Saber’s market power and cause higher prices and less innovation. Although we are disappointed with the court’s decision, we appreciate the court’s thoughtful consideration of this important case. We will carefully consider the Court’s opinion and consider the next steps in light of our commitment to preserving competition for the benefit of the American consumer. “
It is likely that Saber will initiate an additional dialogue with the UK Competition and Markets Authority, or consider further litigation.
Some had argued before these developments in the United States and the United Kingdom that, given the constraint that the entire travel industry, including Saber and Farelogix, must face because of the coronavirus pandemic that Saber could -be renounce the merger. This remains a possibility, although there is no signal to date that Saber’s taste for acquisition has soured.
Note: this story has been updated to include a statement to the United States Department of Justice regarding the adverse decision of the federal court in Delaware.
Photo credit: A couple in coach class on Hawaiian Airlines. A UK regulator blocked the Saber-Farelogix merger on the grounds that it hampered innovation for travel agencies seeking to provide additional seating, meals and Wi-Fi for airline passengers. Rae Huo / Hawaiian Airlines