CELEX: 31992M0229
Language: en
Date: 1992-07-14 00:00:00
Title: COMMISSION DECISION of 14.07.1992 declaring a concentration to be compatible with the common market (Case No IV/M.229 - THOMAS COOK / LTU / WEST LB) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0229

COMMISSION DECISION of 14.07.1992 declaring a concentration to be compatible with the common market (Case No IV/M.229 - THOMAS COOK / LTU / WEST LB) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 199 , 06/08/1992 P. 0000

 COMMISSION DECISION of 14.07.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.229 - THOMAS  COOK / LTU / WEST LB) according to Council Regulation (EEC) No  4064/89  (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying parties Dear Sirs, Subject: <tab> Case No. IV/M229 - Thomas Cook / LTU / West LB <tab> Notification of 16.6.1992 pursuant to Article 4 of  Council Regulation No. 4064/89  1.<ind> The above-mentioned operation concerns the acquisition  of joint control by LTU Lufttransport ("LTU") and Westdeutsche  Landesbank ("West LB") of The Thomas Cook Group Ltd. together  with its US affiliate Thomas Cook Inc. ("Thomas Cook") by way  of the purchase of the entire issued share capital of Thomas  Cook from the Midland Bank Group. LTU will hold its shares in  Thomas Cook through TBG Touristik Beteiligungs-GmbH und Co  ("TBG"), a company specifically formed for that purpose.  2.<ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of application of Council Regulation No. 4064/89 and does  not raise serious doubts as to its compatibility with the  common market.  THE PARTIES  3.<ind> Thomas Cook consists of the UK-based Thomas Cook Group  Ltd., which is a wholly-owned subsidiary of Midland Bank PLC,  and its US affiliate Thomas Cook Inc., a wholly-owned  subsidiary of Midland Montagu Inc., which is in turn a wholly- owned subsidiary of Midland Bank PLC. Thomas Cook's principal  activities include travel agencies, tour operating, travellers'  cheques, and foreign exchange retailing.   4.<ind> LTU is a German travel group controlled by a general  partnership, Conle und Co. OHG, through which the Conle family  owns 60.6% of LTU shares. LTU's activities include air carrier  services, tour operating, and hotel and catering operations.  5.<ind> West LB is a German bank, of which no undertaking or  person has control, the largest shareholder being the state of  North-Rhine Westphalia (43.2%). West LB's main activities are  state banking operations, and clearing operations for savings  banks, in North-Rhine Westphalia.  COMMUNITY DIMENSION  6.<ind> West LB alone has a worldwide turnover well in excess  of 5,000 million ECU. All three enterprises concerned have  Community-wide turnover in excess of 250 million ECU, but do  not achieve more than two-thirds of this turnover in one and  the same Member State. Thus the operation has a Community  dimension.  CONCENTRATION  7.<ind> Contemporaneously with the sale and purchase agreement,  West LB, LTU and TBG have entered into a shareholders  agreement, the provisions of which take effect on completion  and remain in force for so long as West LB and TBG are both  shareholders in Thomas Cook, and West LB holds less than 50% of  the issued share capital of Thomas Cook. The shareholders  agreement provides for control of Thomas Cook to be vested  jointly in West LB and TBG.  8.<ind> On completion West LB will hold 10% of the shares in  Thomas Cook, with the remaining 90% being held by LTU through  TBG. West LB will provide TBG with the funds necessary to  enable it to acquire 76% of the shares and the remaining 14%  will be acquired from LTU's own funds. These financing  arrangements are reflected in the structure of the Thomas Cook  board of directors which will consist of 10 members, 5 of whom  will be nominated by West LB including the chairman who will  have a casting vote. LTU will nominate two directors and the  remaining three directors will be jointly nominated by the two  shareholders. However various important strategic decisions  require the consent of both shareholders; a detailed annual  business plan, together with a "rolling" five-year corporate  plan will be submitted each year by Thomas Cook for approval by  LTU, TBG and West LB, who must all assent to any subsequent  material deviation from the plans. In addition, Thomas Cook  will supply monthly accounts and progress reports to LTU, TBG  and West LB, who must also approve major proposals on  financing, acquisitions and disposals, any material variation  in the nature of the business of Thomas Cook, the engagement  and dismissal of senior employees and the payment of dividends.  Consequently Thomas Cook will be jointly controlled by its new  shareholders.  9.<ind> Thomas Cook currently operates as an autonomous  economic entity and will continue to do so under its new  owners. There is no significant overlap between the activities  of West LB on the one hand, and LTU and Thomas Cook on the  other. LTU and Thomas Cook are both operating in the travel  sector and in particular both have a substantial tour operating  business. However LTU operates in Germany and has no activity  in the United Kingdom and Thomas Cook has only a minor presence  on the German travel market.  Consequently the degree of  geographical overlap between the two undertakings is  negligible.  10.<ind> It is unlikely that the markets for tour operators and  travel agents will develop beyond their existing regional or  national boundaries even with the implementation of the single  market within the Community because many of the barriers  separating the different geographic markets are of a cultural  nature differences of language, and holiday preferences - or  relate to the inconvenience and additional cost of travelling  to another country to connect with a pre-arranged tour.  11.<ind> In view of what is said above, the notified operation  constitutes a concentration within the meaning of Article 3(1)b  of the Regulation.  COMPATIBILITY WITH THE COMMON MARKET  Relevant product markets  12.<ind> The joint venture, Thomas Cook, is a travel agent and  tour operator offering leisure and business travel and is also  involved in the issue and sale of travellers cheques, foreign  exchange retailing and the wholesale trading and distribution  of foreign currency. The only areas in which there is any  overlap with the activities of the parent companies is in the  travel sector. Several different markets can be identified in  this sector. Demand for leisure travel is distinguishable from  demand for business travel. Leisure travel consists largely of  "packages" of accomodation and return travel (air, rail, coach,  and cruises) supplied by tour operators. Business travel  consists largely of hotel accomodation and air or rail travel,  supplied separately by hotel, air, and rail companies. In both  the leisure and business sectors consumers may purchase  directly from suppliers, or through "travel agencies" who  effectively act as retailers.  Relevant geographic markets  13.<ind> The markets within Europe for the supply of travel  services are still essentially national in character. In the  leisure sector, for example, tour operators in a particular  Member State typically sell packages with a point of departure  in that Member State, and market them to residents of that  Member State.   14.<ind> From the consumer's view-point there are a number of  practical obstacles which would make it difficult for a  traveller resident in one Member State to book a package  holiday with a tour operator or travel agent resident in  another Member State. Quite apart from the lack of information  about what is available (i.e. access to brochures of foreign  tour operators and travel agents), linguistic differences can  cause problems in terms of understanding exactly what is  included in the price. In addition, there are legal  complications due to the fact that the contract would normally  be governed by the law of the country of residence of the  foreign tour operator or travel agent, thus making it difficult  for the traveller to seek redress in the event of a complaint.  A further inconvenience and additional cost arises from the  fact that the traveller would have to make his own arrangements  to travel to the point of departure in the territory of the  foreign tour operator.  Customers in neighbouring Member States  may be prepared to cross borders in order to purchase package  holidays, but it is highly unlikely that such cross-border  interpenetration will occur between two widely separate  geographic markets, such as Germany and the United Kingdom, and  there is no evidence to suggest that this occurs.  15.<ind> On the supply side, the national character of European  markets is reflected in differences in the prices of package  holidays, and in tour operators' costs and profit margins.  These differences are particularly marked between the United  Kingdom and other EC Member States. A 1988 study [Package  Holiday Prices 1988 - Bureau Européen des Unions de  Consommateurs] indicated average prices in the UK to be between  20 and 40 per cent lower than in other EC countries. The higher  prices in other countries reflect higher profit margins and  higher costs, in turn due to factors such as more regulated  charter airline operations, lower levels of capacity  utilisation on individual flights, and less success in  obtaining advantageous terms from hotel owners. Cross-border  entry by EC tour operators has so far been extremely limited in  both extent and success.  Assessment  16.<ind> There is a degree of overlap between the activities of  Thomas Cook and LTU in the markets for travel services, but  these markets are still essentially national in character, and  the only Member State in which both Thomas Cook and LTU operate  is Germany. LTU acts as a tour operator and a charter airline  (with a limited quantity of scheduled services). It is the  third largest tour operator in Germany and the largest German  charter airline. By contrast, Thomas Cook which has a  relatively minor presence on the German travel market, acts  primarily as a travel agent in Germany catering largely for  business customers. Thomas Cook and LTU have, respectively,  market shares in Germany of about [Deletion of business secret;  the deleted figure is negligible.] and [The deleted figure is  less than 25%.] in the tour operating sector; in the travel  agency sector both undertakings have less than [The deleted  figure is below 5%.] market share. Consequently the increase in  market share brought about by the concentration is very small.  17.<ind> LTU as a tour operator markets its products through  annual agreements with independent travel agencies. Thomas Cook  in Germany acts as a travel agency for a wide variety of tour  operators, based on agreements subject to 3-6 months' notice.  18.<ind> In view of the above, the market shares involved are  so small as to preclude concern about either horizontal or  vertical links in the travel market.  19.<ind> As far as financial services are concerned, there is  no overlap between the undertakings concerned. LTU has no  activities in the financial sector. West LB's main activities  are state banking operations, and clearing operations for  savings banks, in North-Rhine Westphalia. West LB's retail  banking activities are limited to the provision of banking  services to the employees of the bank  and a small number of  high net worth individuals.  20.<ind> Therefore, the concentration will not create or  strengthen a dominant position as a result of which effective  competition will be significantly impeded in the common market  or in a substantial part of it.  ANCILLARY AGREEMENTS  21.<ind> The parties have entered into a number of ancillary  agreements which are intended to regulate the relationship  between Thomas Cook and Midland Bank. The agreements fall into  two categories. Firstly there are those which are intended to  preserve the value of The Thomas Cook business in the hands of  its new owners by ensuring that Thomas Cook will continue to  benefit from Midland Bank as a distribution channel. These  agreements relate to the Thomas Cook implants in Midland Bank  branches in the UK, and the wholesale and retail supply of  foreign exchange and the supply of travellers cheques.  22.<ind> The second category of agreements comprises those  which are intended to put on an arm's length basis,  arrangements which have existed on an intra-group basis between  Midland Bank and Thomas Cook. A variety of services have been  provided by Midland Bank to Thomas Cook, such as network  services to access tour operators and IT services.  23.<ind> The agreements are all directly related to the  concentration and necessary for its implementation. However,  most of the agreements are of an indefinite duration with a  minimum period of five years. The Commission does not consider  that there is an objective need for agreements of potentially  indefinite duration and therefore the period necessary for the  replacement of the relationship of dependency by autonomy in  the market should be limited to five years. Consequently all  the notified agreements are covered by the present decision for  a maximum period of five years.  24.<ind> For the above reasons the Commission has decided not  to oppose the notified concentration and to declare it  compatible with the common market. This decision is adopted in  application of Article 6(1)b of Council Regulation 4064/89.  For the Commission