2007/781/EC: Commission Decision of 21 August 2007 declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.4523 — Travelport/Worldspan) (notified under document number C(2007) 3938) (Text with EEA relevance )
Date: 2007-08-21
Institutions: European Commission
Subjects: competition law, economic concentration, merger control, provision of services, restrictive-practice authorisation, travel, travel agency

1.12.2007

EN

Official Journal of the European Union

L 314/21

COMMISSION

COMMISSION DECISION

of 21 August 2007

declaring a concentration compatible with the common market and the functioning of the

EEA Agreement
(Case COMP/M.4523 — Travelport/Worldspan)

(notified under document number C(2007) 3938)

(Only the English text is authentic)

(Text with EEA relevance)

(2007/781/EC)

On 21 August 2007 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(1) of that Regulation. A non-confidential version of the full decision can be
found in the authentic language of the case and in the working languages of the Commission on the
website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/
competition/index_en.html

I. SUMMARY

II. EXPLANATORY MEMORANDUM

(1)

Travelport LLC, a subsidiary of the Blackstone Group
(Blackstone, USA), operates Galileo — a global distri-
bution system (GDS) and Gulliver's Travel Associates.
In addition, Travelport operates a number of online
travel
ebookers,
Orbitz, Cheaptickets, Octopus Travel, HotelClub and
RatesToGo.

and websites,

including

agencies

(2) Worldspan Technologies Inc. (Worldspan) provides travel
distribution services through the Worldspan GDS. The
company focuses on providing GDS services to on-line
and, more
travel agencies,
primarily in the leisure sector. Furthermore, Worldspan
provides IT services to airlines (e.g. internal reservation
systems and flight operations technology services).

recently also traditional

(3)

(4)

Pursuant to the operation, based on a referral pursuant to
Article 4(5) of Council Regulation (EC) No 139/2004
(the Merger Regulation) Travelport acquires within the
meaning of Article 3(1)(b) of
the Merger Regulation
control of the whole of Worldspan by way of purchase
of shares.

The Commission’s market investigation has revealed that
the proposed concentration will not give raise to any
competition concerns as a result of which effective
competition would be significantly impeded in the
Common Market or in a substantial part of it.

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

(5)

(6)

(7)

II.1. Relevant Product Market and Possible Alter-
native Market Definitions

In previous cases, the Commission has defined a GDS as
a tool provided to travel agencies (TAs) in order to allow
them to obtain information and make reservations
related to travel service providers (TSPs),
i.e. airlines,
hotels and rental car firms, who in turn supply the
GDS with data on the products they provide.

The product market affected by this transaction is defined
in the Decision as the market for electronic travel distri-
bution services through a GDS. This market is of a two-
sided nature, with two separate customer categories. GDS
providers act as intermediaries, allowing on the one hand
TSPs, (upstream of the GDS provider) to distribute their
travel content to TAs and ultimately to end-consumers
and on the other hand TAs (downstream of the GDS
provider)
for
the
in-depth investigation has
confirmed these characteristics of the product market.

to access
end-consumers. The

and book travel

content

assessed whether — as
the
The Commission has
stated — the relevant product
notifying party has
market consists not only of the GDS providers them-
selves but also of alternative technologies by which
GDS providers can be by-passed and their use avoided.
These alternatives are (i) meta search engines, (ii) direct
links, (iii) so-called ‘GDS New Entrants’ (GNEs) and the
(iv) ‘supplier.com’.

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Official Journal of the European Union

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(8)

The inclusion of the first three in the relevant product
market is dismissed in the Decision, since the in-depth
investigation has clearly shown that they are either not
real GDS substitutes, or that their presence and/or impact
in the EEA is very limited. In order to determine whether
the services provided via ‘supplier.com’ are substitutable
to GDS services and would be part of the same product
market, a complex assessment covering both sides of the
market has been carried out.

(13) Considering that substitution upstream is only partial,
leaving substantial volumes of TSP's bookings ‘captive’
for the GDS providers and the fact that downstream
substitution is very limited, the Decision concludes that
‘supplier.com’ should not be included in the relevant
product market in which GDS-providers are active.

(9)

On the upstream side of the market, ‘supplier.com’ allow
TSPs to significantly reduce their average and marginal
distribution costs, since they ultimately save the booking
fee charged by the GDS as well as the possible booking
commission paid to the TA doing the GDS booking.

is

incentive

(10) Conventional airlines are thus able to compete better
with Low Cost Carriers (LCCs), whose main channel is
‘supplier.com’. An additional
for TSPs
to
promote ‘supplier.com’
that comparison-
shopping between TSPs by the end user becomes more
difficult as individual web-sites have to be consulted. This
partially explains the growth of supplier.com in recent
years. According to IATA data, on average, 25 % of all
bookings of the 20 largest airlines in the EEA were direct
bookings in 2005 (compared to 20 % in 2004 and 16 %
in 2003).

the fact

(11)

to their

The in-depth investigation has shown that the extent to
which TSPs are able to shift bookings away from GDS
‘supplier.com’ varies considerably,
providers
according to the business model chosen by the TSP. It
is also dependent on the size and behavioural profile of
its end-consumer base, which is to some extent ‘captive’
to travel content distribution through a GDS.

receive

substantial

if TAs book though a ‘supplier.com’.

(12) On the downstream side of the market, when booking
through a GDS, TAs
incentive
payments by the GDS providers but also possible
booking commissions paid by the TSPs. This revenue
will be lost
In
order to compensate this loss of revenue, TAs would
need to charge the end-user a service fee (which in its
turn gives the end-user the incentive to book his tickets
himself via ‘supplier.com’
further
decreasing the revenues of
the
Commission concludes in the Decision that TAs have
to
strong incentives to keep using a GDS and not
substitute
via
‘supplier.com’. The Commission in-depth investigation
has
that using
‘supplier.com’
is cumbersome and lacks the versatility
of inventory and price comparability offered by GDSs.

via GDS with bookings

also confirmed that TAs

the TA). Therefore,

instead of

bookings

the TA,

consider

(14)

The Decision recognises however that the rapid uptake of
‘supplier.com’ has
competitive
conditions in the market for GDS services and constrains
the market behaviour of the merged firms.

an impact on the

(15)

(16)

(17)

II.2. Relevant Geographic Markets

The Decision defines the geographic market delineation
of the upstream side of the market as EEA-wide. The
global agreements between TSPs and GDSs normally
include separate regional pricing schemes for the EEA,
the US and other parts of the world. Booking fees paid
by TSPs for a booking made in a GDS are substantially
higher in the EEA than in the U.S. Moreover, the EEA
market is regulated by the EU Code of Conduct, whereas
the
the US market was deregulated in 2006. Finally,
market shares of the GDS providers vary substantially
depending on the region and the country concerned.
Therefore,
the Commission concludes in the Decision
that the competitive conditions in the EEA and the US
differ significantly.

The Decision defines the downstream side of the market
as national
in scope, since market shares of the GDS
providers vary significantly between Member States.
This is in line with previous Commission Decisions and
is confirmed by the market investigation. Almost all TAs
— often including online TAs — are still active in only
one country, with the exception of a few TAs which have
pan-European (or worldwide) activities. The subscription
fees that TAs pay for the use of a GDS and the incentive
payments they receive also vary between countries within
the EEA. In addition, Amadeus and Galileo have estab-
lished national sales and service points in almost all EEA
Member States,
in order to better serve the specific
national markets.

II.3. Competitive Assessment of theories of harm

II.3.1. The theories of harm

In its Decision of 3 May 2007, the Commission found
that
the notified concentration raised serious doubts
as to its compatibility with the common market and
the
The
the
Commission accordingly initiated proceedings pursuant
to Article 6(1)(c) of the Merger Regulation.

EEA agreement.

functioning

of

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Official Journal of the European Union

L 314/23

(18)

In the Article 6(1)(c) Decision it was argued that the
merger could theoretically lead to non-coordinated as
well as coordinated effects. As regards non-coordinated
effects, the Commission identified three theories of harm
which it considered prima facie plausible. In addition to
assessing the risk for coordinated effects, the Commission
focused its in-depth investigation of non-coordinated
effects on assessing whether:

position of the merged firm vis à vis TSPs could result
than Galileo/Worldspan's
in greater market power
upstream market share of
in the EEA
would suggest. This bargaining power could possibly
allow the combined entity to raise prices unilaterally
post merger.

(20 to 30 %)

(i) the merger would allow the parties to use their
strong market position downstream vis à vis TAs in
order to increase prices vis à vis TSPs upstream
(vertical cross market effects);

(22)

for GDS services

The market
is characterised by a
platform facing ‘multi-homing’ on one side and ‘single-
homing’ on the other. TSPs generally use ‘multi-homing’,
as they have to distribute their content via all four GDSs
in order to obtain the desired market coverage, whereas
most TAs use ‘single-homing’, as one GDS suffices in
most cases to provide them with the needed TSP content.

(ii) the merger would eliminate Worldspan as

the
alleged ‘pricing Maverick’ and therefore lead to
post-merger price increases;

(iii) the merger would allow the parties to exploit their
post-merger market power vis à vis TAs in Member
States in which Galileo/Worldspan would have high
market shares.

(23) As long as TAs use ‘single-homing’, GDS providers have
exclusive access to TAs belonging to their respective TA
networks. Each GDS provider therefore has a certain
degree of monopoly power in relation to TSPs that
need to reach the TAs exclusively connected to one
GDS. This monopoly power allows the GDS provider
to charge higher prices to TSPs. These ‘monopoly rents’
extracted from TSPs are to a large extent used to cover
the financial incentives granted to TAs.

II.3.2. Vertical cross-market effects (multi-homing vs. single-

homing)

(24)

(19) During the initial stage of the investigation, concerns
were raised that Galileo/Worldspan would be able to
leverage its post-merger market power vis à vis TAs in
a number of national downstream markets, in order to
in relation to TSPs
strengthen its bargaining power
operating on the upstream EEA market. This possibility
to leverage market power may be labelled as a ‘vertical
cross-market effect’. Such an effect could be described as
follows.

The Commission has however found that the bargaining
interaction between GDS providers and customers on
both sides of the market has started to change. TSPs
and TAs have
increased their bargaining
strength relative to GDS providers. These changes in
the relative bargaining power result from (i) a consoli-
introduction of direct
the
dation among TAs,
bookings via ‘supplier.com’ and (iii) surcharges imposed
by TSPs.

recently

(ii)

(20) After the merger, Galileo/Worldspan would obtain large
market shares with significant increments on the down-
stream side of the market in Ireland, the UK, Italy, the
Netherlands, Hungary and Belgium (see section on the
downstream side of the market below).

(25) Apart

from the threat

to withhold travel content via
‘supplier.com’, TSPs have developed an additional tool
to put pressure on GDSs. By applying, or threatening
to apply surcharges to TAs, TSPs may influence the use
of a specific GDS and make it lose volumes in favour of
either ‘supplier.com’ or another GDS.

(21)

If a TSP has a particular interest in having an extensive
distribution network in a Member State where the
merged firm would have a broad TA network, Galileo/-
Worldspan could possibly leverage
its downstream
market share in that Member State in order to gain
negotiating
concessions
a
the bargaining
worldwide agreement.

TSP when
In other words,

from the

Impact of the merger

(26)

The reduction in the number of GDS providers
is
unlikely to lead to price increases as a result of ‘vertical
cross-market effects’ of
for the following
reasons.

the market

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Official Journal of the European Union

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(27) On the TSP side, the in-depth investigation confirms that
TSPs are capable to force GDS providers to lower their
prices in exchange for full content, or alternatively,
in
order
to avoid surcharges being applied on their
contracted TAs. Airlines in particular have developed a
number of bargaining tools (especially, but not only,
‘supplier.com’) allowing them to retain part of
their
surplus in the negotiation with GDS providers. Even in
a situation with only three GDS providers, none of them
will be able to increase prices because TSPs will maintain
a strong enough bargaining power, based on (i)
the
capacity to channel bookings towards the ‘supplier.com’
websites,
(iii) the
(ii) the surcharges imposed on TAs,
brand recognition in the home market(s) and (iv) the
in the
possibility to develop new bargaining tools
future. Therefore,
in the
the Commission concludes
Decision that a reduction in the number of GDS
providers from four to three does not increase the like-
lihood of unilateral price increases as a result of ‘vertical
cross-market effects’.

(32)

(33)

(28)

This conclusion also applies to other TSPs, such as rental
car companies and hotel chains.

(29) On the TA side, a sufficient number of GDS platforms
will remain available to TAs and switching costs are not
an insurmountable obstacle to choosing another GDS
provider. The fact that GDS providers need to create
and maintain a sufficiently broad network of TAs in
order to generate demand on the TSP side, leaves TAs
in a favourable bargaining position vis à vis GDS
providers even after the elimination of one of them.

(30)

or

possible

In the Decision, the Commission concludes that these
elements (effective bargaining power of the TSPs and
additional
on-going
bargaining tools) suffice to counter the potentially detri-
mental effect of the merger in terms of the reduction
from four
the
to three GDS providers as well as
potential occurrence of vertical cross-market effects.

development

of

The Commission's in-depth investigation shows however,
that this theory of harm cannot be upheld. In order to
conclude that the merger would be likely to lead to
significant post-merger price increases by Worldspan it
would have to be shown that pre-merger Worldspan's
prices are significantly lower than those of its compe-
the merging
titors,
parties would have
to
increase Worldspan's prices post-merger.

in particular Galileo, and that
the

and ability

incentives

II.3.3.1. W o r l d s p a n i s n o t c h a r g i n g l o w e r

p r i c e s

shows

that Worldspan’s

The notifying party submitted a comparison of
the
merging parties' most basic types of booking for 2006:
Galileo’s ‘Active Net Segment’ with Worldspan’s ‘Full
Service’. This
list price is
actually […] than Galileo’s list price for […] types of
‘Full Service’ booking alternatives. Further, if Worldspan's
fees for each booking category are weighted as an
average across all bookings according to the relative
the four categories of Worldspan
weight of each of
pricing under its ‘Full Service’
the
result is USD […], while Galileo’s Active Net Segment
price for 2006 is USD […].

functionality level,

(34)

The Commission therefore concludes in the Decision that
in most cases Worldspan is not the lowest priced GDS
for TSPs. Generally, there is always a cheaper alternative
present on the market than Worldspan.

II.3.3.2. W o r l d s p a n h a s l o s t m a r k e t s h a r e

(35) Another reason why, according to the notifying party,
Worldspan does not qualify as a price maverick,
is
because its alleged low pricing policy has not allowed
Worldspan to aggressively expand its market presence.
The notifying party argues that, on the contrary, as the
smallest GDS in the EEA for more than five years,
Worldspan's market share in the EEA has not showed
any signs of growth.

II.3.3. Loss of Worldspan as ‘pricing maverick’

(36)

(31) A second

of

by

theory

harm investigated

the
Commission relates to Worldspan acting as a ‘price
maverick’
in the EEA, charging lower prices than its
competitors (Galileo, Sabre and Amadeus). During the
market investigation, concerns had been expressed that,
following the loss of competition between the merging
firms, Worldspan's prices would be increased and aligned
to those charged by Galileo.

The evolution of Worldspan's market share between
2003 and 2006 shows a decrease by (0 to 5 %) in the
upstream market (EEA). In relation to the downstream
market, Worldspan's market shares have remained rela-
tively stable, with annual average increases/decreases of
approximately (0 to 5 %) or less, with the exception of
Hungary, where growth took place between 2004 and
2005. Contrary to what one would expect
from a
company which is alleged to be a maverick, Worldspan's
markets shares do not show general signs of growth.

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Official Journal of the European Union

L 314/25

(37)

Finally, according to the notifying party, Worldspan can
not be considered as a price maverick in the EEA, since it
acts rather as a price taker than as a price setter. The
notifying party refers inter alia to the fact that other GDSs
content
were
agreements with five of the major EEA airlines. This is
confirmed by the in-depth investigation.

in the EEA in concluding full

first

II.3.3.3. G a l i l e o / W o r l d s p a n a r e n o t
o t h e r s ' c l o s e s t c o m p e t i t o r s

e a c h

(38)

The notifying party considers that the scope for price
increases by Worldspan's prices post merger is further
decreased by the fact that Galileo and Worldspan are
not each others' closest competitors on the EEA market.

(39)

The in-depth investigation confirms
that Galileo is
generally perceived by TSPs as stronger in corporate
travel, while Worldspan is stronger in leisure travel and
on-line TAs. Downstream, the vast majority of the TAs
considers Amadeus as the closest competitor of both
Galileo and Worldspan.

(44)

six Member States, with significant increments. In these
six Member States the market shares in 2006 range from
(40 to 50 %) to (70 to 80 %).

Member State

Galileo

Worldspan

Combined
market share

Belgium

Hungary

Ireland

Italy

[20-30]

[10-20]

[40-50]

[20-30]

[20-30]

[50-60]

[50-60]

[10-20]

[70-80]

[40-50]

[0-10]

[40-50]

The Netherlands

[30-40]

[20-30]

[50-60]

United Kingdom

[40-50]

[10-20]

[50-60]

The size of the high combined market shares in these six
Member States could potentially allow the parties to
behave
and
of
customers post-merger and exploit their commercial rela-
tionship with TAs.

independently

competitors

their

II.3.3.4. T h e r e

a r e

n o

i n c e n t i v e s

W o r l d s p a n t o i n c r e a s e
p o s t - m e r g e r
a l i g n
G a l i l e o ' s p r i c e s

a n d

f o r
i t s p r i c e s
t h e m t o

(40)

reduces

The fact that the merging parties are not each others'
competitors
closest
the
the
to increase Worldspan's prices post-merger.
parties
Moreover,
the
the decreasing pre-merger margins of
parties indicate that the scope for higher post-merger
prices is limited.

incentives

for

(41)

The likelihood of higher post-merger prices upstream is
further reduced by the fact that such a price increase
would trigger a potential withdrawal of content from
Worldspan's GDS by the TSPs or the imposition of
surcharges by the TSPs on TAs which use Worldspan.

(45) However,

the
the in-depth investigation shows
merger will not allow the merged firms to exert market
power on the TAs in those national markets where the
transaction will lead to high joint market shares.

that

II.3.4.1. D o w n w a r d

t r e n d

o f

G a l i l e o ' s

m a r k e t s h a r e

(46)

The notifying party
lost
argues
significant market shares in each of the Member States
where traditionally it had an important share, due to
historical links with national carriers.

that Galileo has

(42)

the Commission's in-depth investigation
In summary,
shows that
there is insufficient evidence to conclude
that Worldspan charges lower prices than its competitors
and that it would act as a price maverick. As a result, the
Decision concludes that it is unlikely that the transaction
would lead to an increase of Worldspan's prices.

(47)

The decrease in Galileo's market shares would, according
to the notifying party, demonstrate that Galileo's above
average market share does not reflect market power. The
transaction is unlikely to reverse the declining trend in
share, especially given Worldspan’s
Galileo's market
role at an EEA level and its documented
marginal
inability to improve its market position on the EEA
market over the years.

II.3.4. Very large market shares of the parties on the down-

stream side of the market

(43) As regards the downstream side of the market, the trans-
action would lead to high market shares (above 40 %) in

(48)

The trend in Galileo's market shares as well as the
marginal role played by Worldspan at EEA level have
been confirmed by the in-depth investigation.

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(49)

incentives

TAs are in general net receivers as they receive more
financial
than they pay in
from GDSs
subscription fees to the GDSs. Incentive payments have
consistently increased over the last five years, including
in those Member States where the parties have high
market shares (above 40 %). The in-depth investigation
showed that during the period 2003/2006 TA revenues
have in general increased whereas the evolution of their
gross margins is positive.

(50)

This development shows the importance of TAs to GDSs
and reflects the general view among the respondents to
the in-depth investigation that competition between
GDSs on the downstream market is strong.

II.3.4.2. S w i t c h i n g c o s t s

(51) An additional reason why the transaction is unlikely to
result in price increases on the downstream market is
related to the fact, as confirmed by the in-depth investi-
gation,
insurmountable
impediments to switching.

switching costs are not

that

(52) Although the quantification of switching costs is difficult,
both in terms of time and training needed, as well as in
financial terms, some general conclusions may be drawn
from the in-depth investigation. Small TAs need one or
several weeks to change from one GDS to another; the
training needs are not significant and their productivity is
not negatively affected by the change. However,
large
TAs estimate the time needed to switch to approximately
12 months at a significant financial cost (more than EUR
1 million). Also the needs in terms of training are higher.
In particular cases (e.g. because of technical aspects of the
change), the financial cost as well as the timing needed
may be even higher.

(53) Whereas

the

in-depth investigation confirmed that
switching costs exist, it also showed that they have not
prevented significant switching in the past. In the period
2003 to 2006, several TAs moved from Galileo to
Amadeus. In addition, Worldspan lost two of its major
customers in this period, […] and […].

(54)

(i)

the negative evolution of

Even if switching cost exist,
it seems unlikely that the
transaction would lead to competition concerns due to
the parties' high combined market shares downstream.
This is because of
the
parties' joint market shares, (ii) the intense competition
between GDSs, even on national markets where they
have high market shares downstream, as evidenced by
the increase over time in incentives paid to TAs in
such national markets and (iii)
the generally positive
the TAs on the merger which is based on
views of
their conviction that
the merger will create a strong
alternative to Amadeus.

(55)

the Commission concludes in the Decision
Therefore,
that non-coordinated effects are unlikely to be created
as a result of the merger with respect to the downstream
markets.

II.3.5. Coordinated effects

(56)

Furthermore, the in-depth investigation further analysed
the possibility of coordinated effects on both the
upstream and downstream side of the GDS market.

II.3.5.1. U p s t r e a m

Reaching terms of coordination

(57) Generally,

the less complex and the more stable the
economic environment, the easier it is for companies
to reach a common understanding on the terms of coor-
In this context volatile demand, substantial
dination.
in the market or
internal growth by some firms
frequent entry by new firms may indicate that
the
situation is not sufficiently stable to make coordination
likely.

(58) Although during the last five years no significant GDS
market entry took place, the market share evolution of
the economic envir-
the last five years confirms that
onment in which the GDSs compete in the EEA has
been subject to considerable change.

(59)

Further, the growth of ‘supplier.com’ during the last five
years should be taken into account as a destabilising
factor in reaching terms of coordination in the GDS
market. The market
investigation also confirmed that
their direct
most airlines foresee a further growth of
sales via ‘supplier.com’. For rental car companies and
hotels the distribution of travel content by means of
GDS represents a relatively small part of their bookings.

(60)

Even if the above circumstances do not totally rule out
the possibility of reaching terms of coordination between
the three remaining GDSs on the upstream market, the
Commission concludes in the Decision that these circum-
stances would render such coordination more difficult
and thus unlikely.

Monitoring of deviations

(61) Only the credible threat of timely and sufficient reta-
liation keeps companies away from deviating from
terms of coordination. This requires that markets are
sufficiently transparent to allow coordinating companies
to monitor to a sufficient degree whether companies are
deviating.

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(62) Although, the services offered by a GDS are of a rather
homogeneous nature,
the pricing structure and the
product offerings of all GDSs are complex. Currently,
in the EEA, GDSs apply different types of agreements
in parallel, i.e. standard Participating Carrier Agreements
(PCAs) and full content agreements, sometimes comple-
mented by ‘opt-in’ agreements. The differences in and
variety of both the pricing structures and the product
offerings in these agreements make sustained coordi-
nation impracticable. The transparency on the market
that remains is further reduced by the fact that GDSs
modify product offerings and price structures on a
regular basis.

the

(63) Although it would appear from the market investigation
that
car
contracts between GDSs
companies and hotels seem less complex in structure,
they would still not provide the level of transparency
which would make coordination feasible.

and rental

deviating GDS to a different GDS. Although such
measures would be possible,
it would be a costly
strategy as the incentive payments offered to the TAs
has to be sufficiently large to provoke TAs to switch
of GDSs.

(69)

The Commission therefore concludes in the Decision that
retaliation by means of increased incentive payments to
TAs cannot be excluded by itself.

Reactions of outsiders

(70)

For coordination to be successful, the actions of non-
coordinating companies and potential competitors, as
well as customers, should not be able to jeopardise the
outcome expected from the coordination.

(64) A number of respondents to the market investigation
pointed to the existence of so-called ‘Most Favoured
Nation’
(MFN) clauses in their agreements with GDSs.
The use of
increase price trans-
parency. It was confirmed however by the market inves-
tigation, that in most cases the MFN clauses relate to the
obligation on the TSPs to provide the GDS content
parity, and are therefore merely a reflection of the obli-
gations laid down in the Code of Conduct.

these clauses might

(71)

In the present case there would seem to be significant
competitive constraints present on the market which
would destabilise any attempt at coordination. These
constraints would in particular stem from the possibility
of TSPs to withhold content and make this content only
such as
available via a direct distribution channel
‘supplier.com’. In addition, coordination leading to price
increases could provoke TSPs in the EEA to invest more
in the development of alternatives to GDSs such as GNE's
and direct links.

(65) Considering the characteristics of the relevant markets,
transparency,
and in particular,
the Commission considers
it
would be difficult for the three remaining GDSs to effec-
tively monitor
coordinated
behaviour.

in the Decision that

the limited degree of

from the

deviations

Deterrent mechanisms

(66) Coordination is not sustainable unless the consequences
of deviation are sufficiently severe to convince coordi-
nating companies that
to
adhere to the terms of the coordination.

is in their best

interest

it

(67)

Immediate retaliation through the reduction by the coor-
dinating GDSs of the fees charged to TSPs would be
ineffective to retaliate against the deviating GDS, since
it would not provoke switching behaviour by TSPs,
considering that they need the services of all four GDSs.

(68) A more realistic retaliatory measure would be for a GDS
to offer certain important TAs who use the services of
the deviating GDS higher incentives or direct lump sum
to provoke a switch from the
payments

in order

(72) Considering the circumstances described above and the
fact that the criteria that have to be fulfilled in order to
show coordinated effects are cumulative, the merger is
unlikely to result in coordinated effects on the EU market
for the supply of GDS services to TSPs.

II.3.5.2. D o w n s t r e a m

Reaching terms of coordination

(73)

The issue of coordination could in principle also arise on
the downstream market which covers the relationship
between GDSs and TAs. The downstream markets in
the EEA are characterised by significant differences in
market shares between the four GDSs on a country by
country basis.

strong and does not

(74) Competition between GDSs on the downstream market
show signs of coordinated
is
[…] years Galileo and
behaviour. During the
last
Worldspan have lost […] market shares to Amadeus.
Moreover, the market investigation confirms that compe-
tition between GDSs for contracts with TAs is currently
intense, a fact which is reflected by the increase of the
incentive payments by GDSs to TAs over the last five
years.

L 314/28

EN

Official Journal of the European Union

1.12.2007

(75)

the
The above suggests that
merging firms on most downstream markets are rela-
tively unstable, a circumstance which would complicate
reaching agreement on terms of coordination.

the market positions of

Deterrent mechanisms

(78)

The deterrent mechanisms that can be applied are essen-
tially the same as the ones discussed in relation to the
upstream market.

Monitoring of deviations

Reactions of outsiders

(76)

and

terms

offered

complex

conditions

The terms and conditions of TA contracts are generally
non-transparent since they are negotiated individually
between TAs and GDSs. GDSs have no visibility into
the
by
competing GDSs. Although some price transparency
may exist as a result of a possible exchange of infor-
mation between TAs and GDSs
in the context of
contract negotiations, the fact that most contracts are
the
individually negotiated would significantly limit
degree of
this.
result of
transparency that might
Therefore, the possibilities to successfully monitor coor-
dinated behaviour would seem very limited, because it
would require a monitoring of the level of content, func-
tionalities,
financial assistance, bonuses and
other terms and conditions that each GDS offers to indi-
vidual travel agencies.

services,

(77) Considering the limited degree of transparency on the
downstream side of
the Commission
concludes in the Decision that it would be difficult for
the three remaining GDSs to monitor deviations from
the coordinated behaviour.

the market,

(79)

In case of coordinated behaviour, there are not many
readily available alternatives for TAs to turn to. The
use of ‘supplier.com’
is too burdensome for TAs and
the other alternatives to GDSs are currently not well
developed enough in the EEA to constitute adequate
alternatives.

(80) Considering the fact that the criteria that have to be
fulfilled in order to show coordinated effects are cumu-
lative, the Commission concludes in the Decision that
also on the downstream side of the market the merger
is unlikely to result in coordinated effects.

III. CONCLUSION

(81)

the
The Commission concludes in the Decision that
proposed concentration will not give raise to any compe-
tition concerns as a result of which effective competition
would be significantly impeded in the Common Market
the
or
Commission intends
concentration
compatible with the Common Market and the EEA
Agreement,
the
Merger Regulation and Article 57 of the EEA Agreement.

in accordance with Article 8(1) of

substantial part of

it. Consequently,

to declare

in a

the