CELEX: 32020M9778
Language: en
Date: 2020-06-24 00:00:00
Title: Commission Decision of 24/06/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9778 - TUI AG / RCCL / HAPAG-LLOYD CRUISES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 24.06.2020
                                                                C(2020) 4335 final
                                                                                        PUBLIC VERSION
                                                                 In the published version of this decision,
                                                                 some information has been omitted
                                                                 pursuant to Article 17(2) of Council
                                                                 Regulation (EC) No 139/2004 concerning
                                                                 non-disclosure of business secrets and
                                                                 other confidential information. The
                                                                 omissions are shown thus […]. Where
                                                                 possible the information omitted has been
                                                                 replaced by ranges of figures or a general
                                                                 description.
                                                                To the notifying parties
Subject:            Case M.9778 – TUI AG / RCCL / HAPAG-LLOYD CRUISES
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 15 May 2020, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which TUI AG
          (Germany) and Royal Caribbean Cruises Ltd (‘RCCL’, Liberia), through TUI
          Cruises GmbH (‘TUI Cruises’, Germany), intend to acquire within the meaning of
          Article 3(1)(b) and 3(4) of the Merger Regulation joint control of Hapag-Lloyd
          Kreuzfahrten GmbH (‘HLC’, Germany) (the ‘Transaction’). The concentration is
          accomplished by way of purchase of shares.3
(2)       TUI AG and RCCL are together referred to as the ‘Notifying Parties’.
1    OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (the “TFEU”) has introduced certain changes, such as the replacement
     of “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU
     will be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
3    Publication in the Official Journal of the European Union No C 174, 25.5.2020, p. 6.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(3)     RCCL operates oceanic cruises under three wholly owned brands, Royal Caribbean
        International, Celebrity Cruises, and Azamara Club Cruises. It also owns a 66.7%
        stake of Silversea Cruises4, 50% of TUI Cruises, and 49% of Pullmantur Cruises.
        RCCL is the second largest cruise company globally with 63 ships (4 ships joining
        the fleet in 2020-21).
(4)     TUI AG is the ultimate parent company of the TUI Group, an integrated leisure
        tourism group operating through its various subsidiaries hotels, cruise ships, airlines,
        aircraft, travel agencies, tour operators and online portals. It offers to customers
        worldwide holiday experiences in 180 regions. TUI AG is active in the cruise
        business through the operation of Marella Cruises and HLC (TUI AG is currently the
        sole owner). TUI AG also jointly controls TUI Cruises with RCCL.
(5)     TUI Cruises GmbH is a 50:50 joint venture between TUI AG and RCCL (“TUI
        Cruises” or the “JV”).5 TUI Cruises offers contemporary cruises primarily targeting
        German-speaking customers.6
(6)     HLC operates two luxury cruise ships7 and three expedition-type cruise ships8 with
        which it targets customers from German-speaking countries. Cruises on two of the
        three expedition cruise ships are conducted in German only.
2.      THE OPERATION AND CONCENTRATION
(7)     The concentration consists of the acquisition by RCCL of joint control over HLC
        through an expansion of TUI Cruises. This expansion will take place through the
        transfer, from its current owner TUI AG to TUI Cruises, of all shares in HLC as well
        as five cruise vessels and related rights and assets of HLC.
(8)     Following this transfer, the activities of TUI Cruises will extend into a new product
        market, as well as into new geographic markets which were not the object of the
        original JV. Indeed, so far TUI Cruises has been exclusively active in the market for
        contemporary oceanic cruises, while HLC has only focused on luxury/ultra-luxury
        and expedition oceanic cruises. Post-Transaction, TUI Cruises’ scope will therefore
        expand into this new market. As far as the geographic market is concerned, while
        TUI Cruises has so far primarily targeted German-speaking passengers, following
        the Transaction it will be in the position to also target non-German speaking
        passengers (for instance, Danish speaking ones).
4   RCCL acquired the 66.7% stake in Silversea Cruises in 2018.
5   Case M.5024 - TUI/Royal Caribbean Cruises/JV.
6   TUI Cruises operates seven Mein Schiff vessels, ranging in size from 77 302 gross tonnage (“GT”) to
    111 500 GT. Gross tonnage is a function of the volume of all of a ship's enclosed spaces (from keel to
    funnel) measured to the outside of the hull framing.
7   The MS Europa and MS Europa 2 have a size of 28 890 GT and 42 830 GT, respectively, and
    accommodate up to 400 and 500 passengers, respectively.
8   […]* The HANSEATIC class ships can accommodate 230 passengers (MS Bremen up to 155) and are
    15 650 GT in size, while MS Bremen is only 6 752 GT. The HANSEATIC nature and HANSEATIC spirit
    are/will be German-speaking ships, with all cruises conducted in German only.
    * should read: The HANSEATIC nature, the HANSEATIC inspiration and the MS Bremen (to be
    replaced by the HANSEATIC spirit in 2021).
                                                         2
 ---pagebreak--- (9)     The transfer of all shares in HLC and the five cruise vessels and related rights and
        assets of HLC, which will allow the expansion of the JV activities into new product
        and geographic markets, show that TUI AG and RCCL are the real players behind
        the extension of TUI Cruises’ scope.9
(10)    TUI AG and RCCL initiated the agreements that govern the Transaction.10 RCCL
        engaged in multiple discussions with TUI AG regarding the acquisition of HLC over
        the past few years, with the most recent discussions beginning in […]. Moreover,
        TUI AG, RCCL and TUI Cruises are party to the ‘Share and Asset Purchase
        Agreement’ (‘SPA’) dated 7 February 2020, pursuant to which TUI AG will transfer
        the HLC business (all shares, five cruise vessels, and related rights and assets) to
        TUI Cruises. In addition, TUI AG and RCCL are parties to the Restatement of the
        Joint Venture Agreement, which modifies the terms of the original Joint Venture
        Agreement between TUI AG and RCCL, which was executed on 17 December 2007
        and governed the formation of the TUI Cruises JV. Finally, pursuant to the SPA, five
        business days prior to the scheduled main closing date, TUI AG and RCCL will
        make an equity contribution in an aggregate amount of EUR […] into TUI Cruises
        pro rata (50:50).
(11)    In view of the foregoing, TUI AG and RCCL are regarded as undertakings
        concerned.
(12)    The rationale for the Transaction is to allow TUI Cruises to expand its offering to
        include luxury/ultra-luxury and expedition oceanic cruises, a segment in which TUI
        Cruises did not previously operate.11 The Transaction will also generate a net cash
        consideration for the seller TUI AG of approximately EUR […], given that HLC’s
        value is EUR […].12
(13)    In light of the above, the Transaction constitutes a concentration within the meaning
        of Article 3(1)(b) and Article 3(4) of the Merger Regulation.
3.      UNION DIMENSION
(14)    The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million [TUI AG: EUR […] million, RCCL: EUR […]
        million]. Each of them has an EU-wide turnover in excess of EUR 250 million, but
        they do not achieve more than two-thirds of their aggregate EU-wide turnover within
        one and the same Member State. The notified operation therefore has a Union
        dimension.13
4.      MARKET DEFINITION
(15)    Oceanic cruises involve a journey on board a ship undertaken for leisure purposes in
        maritime waters. Oceanic cruises generally combine cabins, restaurants, bars,
9   Paragraph 107 of the Commission Consolidated Jurisdictional Notice.
10  Paragraph 147 of the Commission Consolidated Jurisdictional Notice.
11 Form CO, paragraph 56.
12 Form CO, paragraph 57.
13 Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                         3
 ---pagebreak---        casinos, swimming pools, spas, gyms, theatres, and shopping into a floating resort.
       Cruises typically embark from one port and then visit a number of destinations,
       either for a day or overnight, before returning to the same port or a different port to
       continue the journey.
(16)   Within the overall oceanic cruises market, it is possible to distinguish between
       contemporary, premium, luxury and expedition cruises.14 Contemporary cruise lines
       comprise the largest portion of the oceanic cruise operation industry and operate the
       largest cruise ships. This is the more mass-market end of the market typically
       serving families and couples of all ages. Premium cruises are somewhat smaller in
       size and target families seeking a more high-end experience, middle-aged and senior
       couples, and senior travellers. Luxury and expedition cruises typically offer instead
       longer, more exclusive and luxurious travel experiences including off-the-beaten
       track destinations such as the Artic and Antarctic/South America.
(17)   RCCL and HLC are both involved in the provision of oceanic cruises. Their
       activities overlap in the operation of luxury/expedition cruises, although they target
       different customer groups. HLC offers luxury/expedition cruises primarily to
       German-speaking customers from German-speaking countries (Austria, Germany
       and Switzerland).15 RCCL, through its Silversea and Azamara brands, offers luxury
       and expedition cruises primarily targeting customers from North America and the
       United Kingdom.16
4.1.   Relevant product market
4.1.1. The Notifying Parties’ arguments
(18)   The Notifying Parties claim that land-based holidays and river cruises are, for at
       least some customers, substitutable for oceanic cruise holidays and exert competitive
       pressure on cruise operators. They nonetheless submit that the relevant product
       market within which to assess the Transaction is the market for oceanic cruises.17
(19)   The Notifying Parties further argue that it would not be appropriate to segment the
       oceanic cruise market into contemporary, premium, and luxury/expedition cruise
       offerings as there is not a bright line between these offerings from either a supply or
       demand perspective. Rather, they consider that there is a broad spectrum of oceanic
       cruise products, and different cruise lines compete more or less closely with others
       depending on a range of factors in addition to the level of service offering, including
       fleet, itineraries, departure and return ports, and availability of on-board
       entertainment and experiences.18 The same cruise line, or even the same vessel, can
       offer a range of experiences depending on the class of service booked.19
(20)   The Notifying Parties claim that even within a single vessel different passengers may
       have a more premium or less premium experience depending on the class of service
       or type of cabin booked. This is particularly true with respect to the “ship within a
14  Form CO, paragraph 76. Case M.2706 - Carnival Corporation/P&O Princess.
15  Form CO, paragraph 130.
16  Form CO, paragraph 133.
17  Form CO, paragraph 88.
18  Form CO, paragraph 94.
19  Form CO, paragraph 76.
                                                     4
 ---pagebreak---           ship” concept that has recently been launched on a number of contemporary and
          premium cruise lines, where customers of VIP suites have access to private areas and
          amenities that are equivalent to the service level on a luxury or expedition vessel.20
          Hence, in response to growing demand for luxury services, the Notifying Parties’
          view is that cruise operators can simply develop luxury offerings on contemporary
          and premium vessels.21
4.1.2. Precedents
(21)      In its previous decisions, the Commission has considered the market for the supply
          of oceanic cruises to be distinct from the market for the supply of coastal ferry or
          riverine cruises, and also separate from the market for the supply of other (land-
          based) holidays.22
(22)      The Commission has also considered, whether luxury oceanic cruises constitute a
          distinct product market or are part of the wider oceanic cruises market but left open
          the market definition.23
4.1.3. The Commission’s assessment
(23)      The market investigation has confirmed that cruises are typically classified by the
          type of cruise offering, for example, whether it is a contemporary, premium, and
          luxury and expedition cruise.24 RCCL itself in its internal documents assesses the
          cruise market on the basis of these different segments.25
(24)      A number of elements point to the possibility that luxury and expedition cruises
          could form part of the same relevant market distinct from the overall cruise market,
          although the boundaries around the edges of this possible cruise segment appear
          blurred.
(25)      The ship size differs according to the type of cruise. For example, contemporary
          cruise brands operate the largest vessels (from approximately 100 000 GT and
          above). Premium cruises operate vessels that are somewhat smaller between
          40 000 GT and 120 000 GT. Luxury and expedition cruise operations have smaller
          cruise ships (between 5,000 GT – and 60 000 GT).26
(26)      Luxury and expedition cruises usually operate on smaller cruise ships than
          contemporary and premium cruises which allows them to reach a larger number of
          ports and more remote locations.27 As a result, they can offer passengers a wider
          variety of itineraries, avoiding the more crowded destinations and reaching less
20  Form CO, paragraph 96.
21  Form CO, paragraph 98.
22  Case M.2706 - Carnival Corporation/P&O Princess; case M.3071 - Carnival Corporation/P&O Princess
    (II); case M.4600 - TUI/First Choice.
23  Case M.2706 - Carnival Corporation/P&O Princess.
24  Replies to 3, 5 and 6 of Q1 to competitors.
25  RCCL’s internal documents, QP2, Annex 12.11, slide 11.
26  Form CO, paragraph 80 and replies to 6 of Q1 to competitors.
27  Replies to 7 of Q1 to competitors and 5 of Q2 to travel agents. Non-confidential version of the minutes of
    the call with a competitor of 2 June 2020.
                                                         5
 ---pagebreak---        travelled ports such as in the Arctic, Antarctica and South America.28 Norwegian
       Cruise Line’s (‘NCL’) luxury cruise brand Regent Seven Seas (‘Regent’) for
       instance reaches 450 destinations per year, whereas the larger ships of its
       contemporary and premium brands visit fewer destinations.29
(27)   Consequently, luxury and expedition cruises are also typically longer than
       contemporary and premium cruises. While the duration of luxury and expedition
       cruises is on average 10-14 days, the average duration of a contemporary cruise is
       approximately 7 days.30
(28)   Furthermore, luxury and expedition cruise ships guarantee a higher space/passenger
       ratio as well as a higher crew/passenger ratio than those of contemporary and
       premium cruise ships.31 While for instance on a premium or contemporary cruise the
       crew/passenger ratio is approximately 1/2-1/2.5, for a luxury and expedition cruise it
       is 1/1.6.32 As for the space/passenger ratio, on a luxury and expedition cruise this
       ranges between 50-66 GT per passenger, compared to the 30-41 GT of a
       contemporary cruise, and the 40-46 GT of a premium cruise.33
(29)   The Commission acknowledges that premium and contemporary cruises can offer
       accommodation – such as the ‘ship within the ship’ concept accommodation – which
       target and appeal to luxury cruise passengers. An example of this, within RCCL’s
       cruise offering, is the possibility for passengers that book Royal Suite Class
       accommodations – on a contemporary cruise – to receive unique amenities and
       services that offer a premium or luxury experience. These luxury services range from
       dedicated check-in and priority boarding to concierge service and exclusive
       activities.34 A further example is the ‘The Haven,’ within NCL’s fleet, which is an
       exclusive area at the top of a ship where passengers have exclusive access to luxury
       amenities. However, while the crew/passenger ratio, space/passenger ratio in these
       luxury areas is similar to those on luxury and expedition ships, this is only true for
       the luxury section of the ship. Once the passenger leaves the luxury section, the
       experience will be that of a premium or contemporary ship.35 For these reasons,
       although part of the experience in such luxury areas is similar to that of a
       luxury/expedition cruise ship, it cannot be regarded as being a true alternative in the
       eyes of many luxury customers.36
(30)   RCCL’s internal documents support this conclusion when observing that, […].37 As
       a result, once a customer experiences a luxury cruise, they typically do not go back
       to less luxurious cruise experiences.38
28 Replies to 7 of Q1 to competitors and replies to 3.1 of Q2 to travel agents. Non-confidential version of the
   minutes of the call with a competitor of 2 June 2020.
29 Non-confidential version of the minutes of the call with a competitor of 2 June 2020.
30 Replies to 6 and 7 of Q1 to competitors.
31 Reply to 5 of Q2 to travel agents.
32 Replies to 6.1 of Q1 to competitors.
33 Replies to 6 of Q1 to competitors.
34 Form CO, paragraph 96.
35 Non-confidential version of the minutes of the call with a competitor of 2 June 2020.
36 Non-confidential version of the minutes of the call with a competitor of 2 June 2020.
37 RCCL’s internal documents, Annex 12.11, slide 30.
                                                          6
 ---pagebreak--- (31)    Further evidence pointing to luxury and expedition cruises as a distinct product
        market is that, were prices to increase on a permanent basis by 5-10%, most luxury
        cruise passengers would accept such a price increase. One competitor noted that
        most luxury cruise passengers would accept such a price increase as a “general cost
        increase”.39 Few passengers would consider turning to a top-cabin category of a
        premium vessel and the market investigation indicated that this “phenomenon [the
        trade down to a more affordable premium option] would likely be the exception
        rather than the rule”.40
(32)    Additional factors relating to quality and service further distinguish luxury and
        expedition cruises.41 For example, they often include pre-and-post luxury options
        such as high-end hotel stays and flight arrangements.42 Luxury cruises also provide
        more exclusive shore excursions in terms of access and smaller size of tours. This is
        also supported by RCCL’s internal documents, which observe that […].43
(33)    Some differences also appear to exist between the way luxury and expedition cruises
        and other types of cruises are booked. Compared to other types of cruise holidays, a
        lower number of luxury and expedition cruises are booked online and there is a
        higher recourse to travel agents.44 Not all luxury cruises can be booked online45 and
        even if they can, there is still a preference for travel agents. This is because luxury
        and expedition cruise passengers value and require a higher and more personalised
        level of service where travel agents explain in detail the products offered, guiding
        customer choices and make special travel arrangements.46 RCCL’s internal
        documents […].47
(34)    In terms of prices, the market investigation has highlighted that there is no clear
        dividing line between the contemporary, premium, and luxury and expedition cruise
        segments, with the prices for luxury and expedition cruises being the highest.48
        Average prices per night per passenger on a contemporary cruise range from EUR 90
        to EUR 250,49 average prices on a premium cruise from EUR 250 to EUR 500.50
        Average prices on luxury and expedition cruises are EUR 500-600 per day but can
        be as high as EUR 2 000.51
38 Non-confidential version of the minutes of the call with a competitor of 2 June 2020. Competitor’s reply
   to 4 of Q1 to competitors.
39 Reply to 4 of Q1 to competitors.
40 Competitors’ reply to 4 of Q1 to competitors.
41 Replies to 9 of Q1 to competitors.
42 Replies to 9 of Q1 to competitors.
43 RCCL’s internal documents, QP2, Annex 12.11, slide 23.
44 From CO, paragraph 84. Replies to questions 8 and 8.1 of Q1 to competitors.
45 Replies to 6.1 of Q2 to travel agents.
46 Replies to questions 8 and 8.1 of Q1 to competitors and to questions 6 and 6.1 of Q2 to travel agents.
   Form CO, paragraph 84.
47 RCCL’s internal documents, Annex 12.11, slide 24.
48 Replies to 5 of Q1 to competitors.
49 Form CO, paragraph 80.
50 Form CO, paragraph 80.
51 Form CO, paragraph 80. Replies to 5 of Q1 to competitors.
                                                        7
 ---pagebreak--- 4.1.4. Conclusion
(35)    For the purposes of this decision, it is not necessary to conclude on whether
        luxury/expedition cruises constitute a separate product market, as in any event the
        Transaction would not raise serious doubts as to its compatibility with the internal
        market.
(36)    The Commission will therefore assess the effects of the Transaction on the following
        product markets: the overall market for the provision of oceanic cruises; and the
        possible distinct market for the provision of luxury/expedition cruises.
4.2.    Relevant geographic market
4.2.1. The Notifying Parties’ arguments
(37)    The Notifying Parties submit that there are factors indicating that the geographic
        market for oceanic cruises is broader than national and is likely to be at least EEA-
        wide.52 They claim that since the Commission’s decision in M.2706 - Carnival
        Corporation/P&O Princess, a significant portion of customers now book online.53 As
        far as prices are concerned, they also state that […].54
(38)    They nonetheless recognise that market penetration of individual cruise operators
        and of cruise holidays in general differs from one Member State to another.55 They
        further point to the following factors to claim the existence of a Germanic market
        comprising at least Germany and Austria: the language; on-board service
        preferences; similar level of penetration; […].56
4.2.2. Precedents
(39)    In its previous decisions, the Commission has concluded that the markets for the
        supply of oceanic cruises should be considered as national in scope.57 In case
        M. 2706 - Carnival Corporation/P&O Princess,58 the Commission based itself on a
        number of elements to conclude that the relevant geographic markets for oceanic
        cruises were national. These elements included: the fact that the market presence of
        cruise operators and the penetration of the cruise holiday were different from one
        Member State to another; specialised cruise agencies and general travel agents
        operated on a predominantly national level and only a small amount of sales were
        made via the Internet; marketing and promotions were usually run at national level;
        and pricing strategies and price levels were different in each Member State.59
52  Form CO, paragraph 104.
53  Form CO, paragraph 105.
54  Form CO, paragraph 106.
55  Form CO, paragraphs 107-108.
56  Form CO, paragraph 109.
57  Case M.334 - Costa Crociere/Chargeurs/Accor; case M.2706 - Carnival Corporation/P&O Princess; case
    M.3071 - Carnival Corporation/P&O Princess (II); case M.4600 - TUI/First Choice.
58  Case M.2706 - Carnival Corporation/P&O Princess.
59  Case M.2706 - Carnival Corporation/P&O Princess.
                                                        8
 ---pagebreak--- 4.2.3. The Commission’s assessment
(40)    The market investigation in this case has not produced evidence indicating that the
        Commission should depart from the approach taken in its previous decisions
        concluding the existence of national markets.
(41)    The vast majority of cruise operators responding to the market investigation have
        confirmed that specialised cruise agencies and/or general travel agents
        predominantly operate at national level.60 In this respect, a competitor has for
        instance explained that travel agencies rarely sell across borders due to regulatory
        hurdles.61
(42)    Cruise operators have also confirmed that when selling cruise packages via the
        Internet, their websites target national markets and that marketing strategies and
        communications appear to be customised depending on the targeted country.62
(43)    The majority of cruise operators have further indicated that prices for cruise holidays
        having the same destination differ depending on the Member State in which they are
        marketed. In this regard, a competitor has indicated that a destination can be more
        appealing and more accessible (in terms of port of embarkation) from one country to
        another, which, in turn, could have an effect on the price offering. 63
(44)    A minority of respondents provided responses indicating that the relevant geographic
        market could be seen as comprising a cluster of German-speaking countries
        (i.e. Austria and Germany).64 However, since there is limited recourse to online
        booking when booking a luxury/expedition cruise, with customers tending to book
        through travel agents, which predominantly operate at national level,65 the
        Commission considers that there is not sufficient evidence to depart from the
        conclusion reached in its previous decisions that cruise markets are national.
4.2.4. Conclusion
(45)    Therefore, in line with the precedents, for the purposes of the present case, the
        Commission considers the relevant geographic markets to be national for both the
        overall market for oceanic cruises and luxury/expedition cruises.
4.3.    Conclusion on market definition
(46)    The Commission will therefore assess the effects of the Transaction on the markets
        for the supply of oceanic cruises and for luxury/expedition cruises at national level.
60  Replies to 12 of Q1 to competitors.
61  Competitor’s reply to 12 of Q1 to competitors.
62  Replies to 13 and 14 of Q1 to competitors.
63  Replies to 15 of Q1 to competitors.
64  Replies to 10 of Q2 to travel agents.
65  See recital 41 of this decision.
                                                   9
 ---pagebreak--- 5.       COMPETITIVE ASSESSMENT
(47)     The transaction gives rise to a change from sole to joint control over the business of
         HLC. Therefore, the competitive assessment will focus on the extent to which RCCL
         competes with HLC, on the basis that HLC is currently solely controlled by TUI AG.
(48)     RCCL is a global cruise operator and is active in the EEA through its brands Royal
         Caribbean International, Celebrity Cruises, Azamara Club Cruises, Silversea Cruises
         and Pullmantur Cruises. Silversea Cruises and Azamara Club Cruises are the RCCL
         brands, which address the luxury/expedition cruise market. HLC is a
         luxury/expedition cruise operator which primarily targets German-speaking
         customers.
5.1.     Market structure
(49)     The Transaction gives rise to horizontal affected markets in Germany and Austria in
         the overall oceanic cruise market. As set out in Tables 1 and 2 below, the
         Transaction gives rise to combined market shares of [20-30]% in Germany and [20-
         30]% in Austria. In the overall oceanic cruise market, the increment brought about
         the Transaction is low, [0-5]% in Germany and [0-5]% in Austria.
Table 1: Shares of oceanic cruises by passenger cruise days (“PCDs”), Germany
(2016-2018)66
                                        2018                         2017                         2016
Cruise Operator                  PCDs          Shares         PCDs         Shares          PCDs          Shares
RCCL (excl. TUI Cruises)          […]          [0-5]%          […]         [0-5]%           […]          [0-5]%
TUI AG (excl.          TUI
                                  […]          [0-5]%          […]         [0-5]%           […]          [0-5]%
Cruises and HLC)
HLC                               […]          [0-5]%          […]         [0-5]%           […]          [0-5]%
TUI Cruises                       […]         [20-30]%         […]        [20-30]%          […]        [20-30]%
Combined                          […]         [20-30]%         […]        [20-30]%          […]        [20-30]%
Other                             […]         [70-80]%         […]        [70-80]%          […]        [70-80]%
Total                             […]          100.0%          […]         100.0%           […]         100.0%
Source: Parties’ best estimates
66  Market shares for the oceanic cruises market have been calculated on the basis of both the number of
    actual transported passengers per country and the passenger cruise days (PCD), the latter obtained by
    multiplying the market for passengers by the specific average cruise duration (available through the Cruise
    Lines International Association – “CLIA”). To determine the annual number of passengers from each
    country, the Notifying Parties have used data from CLIA. While their estimates for competitors’ market
    shares in 2018 rely on information from CLIA regarding the number of passengers from Germany and
    Austria, for 2019, CLIA has not yet released its report.
                                                          10
 ---pagebreak---  Table 2: Shares of oceanic cruises by passenger cruise days, Austria (2016–2018)
                                           2018                 2017               2016
Cruise Operator                      PCDs      Shares     PCDs      Shares  PCDs       Shares
RCCL (excl. TUI Cruises)              […]      [0-5]%      […]      [0-5]%   […]       [0-5]%
TUI AG (excl. TUI Cruises and HLC)    […]      [0-5]%      […]      [0-5]%   […]       [0-5]%
HLC                                   […]      [0-5]%      […]      [0-5]%   […]       [0-5]%
TUI Cruises                           […]     [10-20]%     […]    [10-20]%   […]      [10-20]%
Combined                              […]     [20-30]%     […]    [20-30]%   […]      [10-20]%
Other                                 […]     [70-80]%     […]    [70-80]%   […]      [80-90]%
Total                                 […]      100.0%      […]      100.0%   […]       100.0%
 Source: Parties’ best estimates
 (50)    The Transaction also gives rise to affected markets in the luxury/expedition cruise
         market in Germany and Austria.
 (51)    As set out in Tables 3 and 4 below, the Transaction gives rise to combined market
         shares of [40-50]% in Germany and [40-50]% in Austria, when looking at data for
         the luxury/expedition market. In both markets, HLC is the leading player, with
         shares of [30-40]% in Germany and [30-40]% in Austria. The second and third
         largest players are the global cruise operators Carnival and NCL respectively, who
         are active through their brands Seabourn and Cunard (for Carnival) and Regent
         (NCL). As can be seen by the market share data in Tables 3 and 4, Hurtigruten is the
         fourth largest competitor in Germany and Austria. RCCL is the sixth and fifth largest
         player with relatively low market shares of [5-10]% in Germany and [10-20]% in
         Austria.
 (52)    The JV, TUI Cruises, is active only in contemporary and premium cruise markets
         and is not present in the luxury/expedition cruise market.
                                                    11
 ---pagebreak---  Table 3: Shares of luxury/expedition oceanic cruises by number of passengers,67
 Germany (2016–2018)
                                      2018                       2017                       2016
 Cruise Operator            Passengers       Shares     Passengers       Shares    Passengers      Shares
 RCCL       (excl.   TUI
                                […]         [5-10]%        […]          [5-10]%        […]        [5-10]%
 Cruises)
 TUI AG (excl. TUI
                                […]          [0-5]%        […]           [0-5]%        […]         [0-5]%
 Cruises and HLC)
 HLC                            […]        [30-40]%        […]         [30-40]%        […]       [40-50]%
 TUI Cruises                    […]          [0-5]%        […]           [0-5]%        […]         [0-5]%
 Combined                       […]        [40-50]%        […]         [40-50]%        […]       [40-50]%
 Carnival                       […]        [10-20]%        […]         [10-20]%        […]       [10-20]%
 Norwegian                      […]        [10-20]%        […]         [10-20]%        […]       [10-20]%
 Hurtigruten                    […]        [10-20]%        […]         [10-20]%        […]       [10-20]%
 Viking Ocean Cruises           […]         [5-10]%        […]          [5-10]%        […]         [0-5]%
 Other                          […]         [5-10]%        […]          [5-10]%        […]       [10-20]%
 Total                          […]         100.0%         […]          100.0%         […]         100.0%
 Source: Parties’ best estimates
 Table 4: Shares of luxury/expedition oceanic cruises by number of passengers, Austria
 (2016–2018)
                                     2018                       2017                        2016
Cruise Operator             Passengers      Shares     Passengers      Shares     Passengers       Shares
RCCL       (excl.   TUI
                               […]        [10-20]%        […]        [10-20]%        […]         [10-20]%
Cruises)
TUI AG (excl. TUI
                               […]          [0-5]%        […]          [0-5]%        […]           [0-5]%
Cruises and HLC)
HLC                            […]        [30-40]%        […]        [30-40]%        […]         [30-40]%
TUI Cruises                    […]          [0-5]%        […]          [0-5]%        […]           [0-5]%
Combined                       […]        [40-50]%        […]        [40-50]%        […]         [40-50]%
Carnival                       […]        [10-20]%        […]        [10-20]%        […]         [10-20]%
Norwegian                      […]        [10-20]%        […]        [10-20]%        […]          [5-10]%
Hurtigruten                    […]        [10-20]%        […]        [10-20]%        […]         [10-20]%
Viking Ocean Cruises           […]         [5-10]%        […]         [5-10]%        […]           [0-5]%
Other                          […]         [5-10]%        […]         [5-10]%        […]          [5-10]%
Total                          […]          100.0%        […]         100.0%         […]          100.0%
 Source: Parties’ best estimates
 5.2.     The Notifying Parties’ arguments
 (53)     The Notifying Parties submit that the Transaction will not give rise to a significant
          impediment to effective competition on any market.
 (54)     First, they argue that their market shares are low. When looking at market shares in
          the overall oceanic cruises market, they have a combined market share of [20-30]%
 67   The Notifying Parties have only been able to provide market shares based on passenger numbers for the
      luxury/expedition cruise market. Form CO, paragraphs 124-125.
                                                         12
 ---pagebreak---         at EEA level, and if looking at national market shares, [20-30]% in Germany and
        [20-30]% in Austria, the only two affected markets, based on the market shares
        calculated on the basis of passenger cruise days.68 Should the product market be
        subdivided according to the level of the passenger experience, the combined market
        shares would be higher in luxury/expedition cruises, reaching [40-50]% in Germany
        and [40-50]% in Austria (shares at EEA level are [10-20]%).
(55)    However, in all of these scenarios, the Notifying Parties argue that the increment
        produced by the Transaction is rather low ([0-5]% in Germany and Austria when
        looking at overall oceanic cruises and when looking at a potential luxury/expedition
        cruise market, [5-10]% in Germany and [10-20]% in Austria). The Notifying Parties
        also argue that the overall passenger numbers in the luxury/expedition segment are
        low, accounting for only around […] passengers in Germany and around […]
        passengers in Austria.
(56)    Second, the Notifying Parties argue that the Transaction does not change the
        competitive interaction between them. To the extent that the Commission considers a
        narrow sub-segment for luxury cruises, TUI Cruises and HLC will continue to
        operate, under the terms of the JV agreement, autonomously and fully separately
        from RCCL’s cruise business. These brands operate English-language cruise ships
        that are not targeted or marketed to customers in Germany or Austria. HLC, to the
        contrary, is a luxury cruise brand that is highly targeted to German-speaking
        customers.
(57)    Third, the Notifying Parties argue that HLC competes mostly closely with other
        German-language cruise offerings (regardless of whether they have luxury
        offerings), than other luxury brands.
(58)    Fourth, the Notifying Parties argue that the luxury segment is growing significantly,
        and there are a number of other luxury brands that do constrain, and will continue to
        constrain post-Transaction, RCCL’s luxury cruise brands and HLC. Indeed, there are
        currently three players Carnival, NCL and Hurtigruten that are active in the luxury
        segment in Germany and Austria and have a market share higher than RCCL. They
        also refer to a number of possible new entrants in this area such as MSC, one of the
        global cruise operators, which is expected to launch a new luxury brand in 2023
        offering German-language cruises targeted at German, Austrian and Swiss
        customers.
5.3.    The Commission’s assessment
(59)    HLC is active in the luxury/expedition market. RCCL also operates
        luxury/expedition cruises. The Commission’s competitive assessment has focussed
        on the extent to which RCCL and HCL compete in the luxury/expedition market,
        and the extent to which such competition would be eliminated following the
        Transaction.
68  The oceanic cruises market share data is based on PCD because this better represents the revenue
    generated by passengers. The Notifying Parties have also provided markets shares based on passenger
    numbers. The market shares for oceanic cruises based on passenger numbers are [20-30]% (Germany) and
    [10-20]% (Austria).
                                                        13
 ---pagebreak--- (60)   As the market share data in Tables 3 and 4 above show, there are several cruise
       operators active in the luxury/expedition cruise market. The existence of multiple
       players active in the luxury/expedition market is also evident from RCCL’s internal
       documents. The document distinguishes between the “true luxury” brands and “high
       end” brands. For example, Figure 1 below shows that in the “true luxury” segment,
       in addition to Silversea and HLC, other luxury cruise brands include Seabourn
       (Carnival), Regent (NCL), Crystal Cruises (Genting), Paul Gaugin (Compagnie du
       Ponant), SeaDream and Ritz Carlton Yacht Collection.69 According to Figure 1
       “high end” brands include Hurtigruten, Cunard (Carnival), Viking Cruises, Oceania
       Cruises (NCL) and RCCL’s brands Azamara and Celebrity Cruises. Both Silversea
       and HLC are also active in the expedition cruise segment, an area in which
       additional competitors are also active, including Lindblad Expeditions and
       Hurtigruten.
Figure 1 – RCCL’s internal document showing cruise operators active in luxury/
expedition cruises
[…]
       Source: RCCL’s internal documents, QP2, Annex 12.10, slide 3
(61)   When looking at the affected markets of Germany and Austria, it is clear that HLC is
       the leading player in luxury/expedition cruises, with market shares of [30-40]% in
       Germany and [30-40]% in Austria.70 The second largest player in these markets is
       Carnival, with significantly lower market shares of [10-20]% (Germany) and
       [10-20]% (Austria). These market shares indicate that HLC stands somewhat apart
       from the other players active in the market. This is confirmed by the market
       investigation and HLC’s own internal documents. For example, one travel agent
       commented for that, “I would suggest that the Hapag Lloyd fleet is something of a
       stand alone player, as the only German language luxury cruise product.”71 HLC in
       its internal documents […]72 Travel agents also indicated that, for German-speaking
       passengers, it was important for them to be able to speak German on-board cruise
       ships.73
(62)   The Commission investigated the Notifying Parties’ claim that HLC competes most
       closely with other German cruise brands, rather than other luxury cruise brands (see
       recital (57) above). This does not however appear to be supported by the market
       investigation […]. The market investigation indicated that the next best alternatives
       to HLC from a passenger perspective, or the closest competing brands from a
       competitor perspective, were other luxury/expedition cruise brands such as
       Hurtigruten, or other international luxury/expedition brands such as Regent,
69 Ritz Carlton Yacht collection was due to start operating cruises during the course of 2020 (Form CO,
   paragraph 142).
70 Form CO, paragraph 114. The Notifying Parties consider that the markets shares in luxury/expedition
   overstates RCCL’s and HLC’s market position because the data is incomplete since the Notifying Parties
   were not able to obtain market share data for smaller operators e.g. Ritz Carlton Yacht Collection,
   Zegrahm Expeditions, Abercrombie & Kent, Lindblad Expeditions/National Geographic, Alaskan Dream
   Cruises, Quark Expeditions, Aqua Expeditions, and UnCruise Adventures.
71 Replies to 16 of Q2 questionnaire to travel agents.
72 HLC’s internal documents, QP2, Annex 12.5, slide 14 […]
73 Replies to 14 of Q2 to travel agents.
                                                       14
 ---pagebreak---        Seabourn, Compagnie du Ponant, or Silversea (RCCL).74 Hurtigruten also
       considered that HLC was its closest competitor, and in particular in Germany, its
       most important market.75 The majority of market respondents also indicated that the
       closest competing brands to Silversea were typically the other international luxury
       cruise brands such as Regent, Seabourn or Crystal Cruises. Therefore, while the
       market investigation indicated that Silversea can be considered to be a competitor to
       HLC, it does not compete closely and a number of market respondents indicated that
       Silversea was merely one of a number of competing brands.76
(63)   Further, based on the market share data in Germany and Austria, Carnival and
       Norwegian’s luxury brands would appear to compete more closely with HLC than
       Silversea in these markets. The Commission notes that Regent (NCL) and Seabourn
       (Carnival) are important cruise luxury brands in their own right and are owned by
       two of the largest global cruise operators (Carnival is the largest cruise operator and
       NCL is the third largest operator globally).77 The Commission also observes that
       while at least one market participant considered Silversea to be “the most
       European”78 of the international luxury/expedition cruise brands, Silversea does not
       actively target German-speaking passengers and that in the future, any targeting of
       German-speaking passengers would continue to be done through HLC and TUI
       Cruises, rather than RCCL’s other cruise brands.79
(64)   RCCL’s and HLC’s internal documents confirm that […]. For example, RCCL
       distinguishes HLC as […]80 and […]. In expedition cruises, RCCL considers […] to
       be the closest competitors to Silversea since they offered the most luxurious
       experiences.81 HLC in its internal documents also notes that […].82
(65)   The luxury/expedition cruise market is also the fastest growing in the cruise
       industry, with RCCL noting in one internal document that, […]83 In this context, and
       as noted by the Notifying Parties, a number of new entrants are expected to start
       operating new luxury and expedition cruises in the coming years and existing players
       are to expand their fleets.84 For example, MSC, one of the global cruise operators not
       currently active in the luxury/expedition cruise market, announced that it will launch
       a new luxury cruise brand in 2023. It will be an international brand, but will offer
       multiple languages, including German, on-board.85
(66)   In addition, Hurtigruten, the expedition cruise operator, whose ships all operate as
       bilingual English and German, has recently launched two new vessels which are
74 Replies to 16 of Q1 to competitors and 12 of Q2 to travel agents.
75 Competitor’s reply to 16.1 of Q1 to competitors, “In expedition cruising, Hapag-Lloyd Cruises is
   Hurtigruten's closest competitor, especially in the German market.”
76 Replies to 16 of Q1 to competitors and 12 of Q2 to travel agents.
77 Form CO, paragraph 132.
78 Non-confidential version of minutes of the conference call with a competitor of 2 June 2020.
79 Form CO, paragraphs 56, 133-134.
80 RCCL’s internal documents, QP2, Annex 12.9.
81 RCCL’s internal documents, QP2, Annex 12.10 slide 36.
82 HLC’s internal documents, QP2, Annex 12.5, slide 14.
83 RCCL’s internal documents, QP2, Annex 12.11, slide 11.
84 Form CO, paragraphs 142-143.
85 Press release dated 18 October 2018 https://www.msccruises.com/en-gl/About-MSC/News/MSC-Luxury-
   Cruise-Ships.aspx and RFI 1 to MSC of 5 June 2020.
                                                         15
 ---pagebreak---        intended to continue to serve the German cruise market, its most important market.
       From 2021, Hurtigruten will also offer more cruises from Hamburg targeted
       specifically at German-speaking guests.86
(67)   A majority of respondents in the market investigation did not raise concerns
       regarding the impact of the Transaction.87 For example, one travel agent highlighted
       the differences between RCCL’s and HLC’s businesses, when commenting on the
       Transaction that, “We do not see any impact here, as products are completely
       different, customer flows do not overlap…”.88
(68)   In view of the above, and in particular the absence of close competition between
       RCCL and HCL and the existence of a number of alternative and close competitors
       to them, the Commission considers it unlikely that the merger will create or
       strengthen a dominant position or otherwise significantly impede effective
       competition in the market for the overall provision of oceanic cruises, or in the
       possible distinct market for the provision of luxury/expedition cruises, in Germany
       or Austria. Therefore, the Commission considers that the Transaction does not raise
       serious doubts as to its compatibility with the internal market or the functioning of
       the EEA Agreement irrespective of the precise market definition.
6.     CONCLUSION
(69)   For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with the
       EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
       Merger Regulation and Article 57 of the EEA Agreement.
                                                       For the Commission
                                                       (Signed)
                                                       Margrethe VESTAGER
                                                       Executive Vice-President
86 Competitor’s reply to 19.1 of Q1 to competitors.
87 Replies to 16 of Q2 to travel agents.
88 Customer’s reply to 15 of Q2 to travel agents.
                                                    16