CELEX: 32014M7358
Language: en
Date: 2014-10-09 00:00:00
Title: Commission Decision of 09/10/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7358 - DNATA / STELLA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 9.10.2014
C(2014) 7470 final

                                        To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7358 - Dnata / Stella
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 4 September 2014, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation  (EC)
       No 139/2004 by which dnata (the United Arab Emirates) acquires within the meaning of Article 3(1)(b) of the Merger Regulation  control  of
       the whole of the UK travel services business of Stella Travel Services UK Limited and of Stella Global UK Limited (together, ‘Stella’, the
       United Kingdom) by way of a purchase of shares.

       THE PARTIES

    2) dnata is a sister company of Emirates, the international airline. Dnata and Emirates are wholly-owned by  the  Investment  Corporation  of
       Dubai (“ICD”), which is in turn wholly-owned by the Government of Dubai. ICD plays no part in the management  of  Emirates  Group[2].  The
       Transaction will be carried out by dnata Travel Holdings UK Limited within the Emirates Group.

    3) Stella is a UK travel business, originally set up as a subsidiary business of the Stella Travel Group, an Australian  hotels  and  leisure
       travel business. The UK business is ring-fenced from the wider Stella structure and is also the only trading asset in the wider structure.
       Stella does not have any activities outside the United Kingdom. Stella and the Emirates Group are referred to as the "Parties".

       THE CONCENTRATION

    4) On 4 September 2014, dnata entered into a binding share purchase agreement with STS UK Holdco II Limited  and  Stella  Global  Travel  PTY
       Limited to purchase the entire issued share capital of Stella.

    5) Therefore, the Transaction results in a concentration under Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

    6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million[3],  namely  ICD  EUR  16  600[4]
       million and Stella EUR 253 million.  Each of them has an EU-wide turnover in excess of EUR 250  million:  ICD  [above  EUR  250  million];
       Stella  EUR 253 million, but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the  same  Member
       State.

    7) The notified operation has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

1 Market definition

1 Product market definition

       Parties' activities

    8) Stella's business is  structured  around  four  core  business  divisions:  (i)  tour  operating  and  distributing  of  flights  ("flight
       consolidating") primarily offering long-haul flights and package holidays (via the companies Travelbag and Travel2),  (ii)  online  travel
       agency business offering nearly exclusively short-haul dynamic packages (flights and  hotel bookings) (via the company  Sunmaster),  (iii)
       supply of hotel rooms for inclusion in short haul holiday packages around the Mediterranean (via the company Triton)  and  (iv)  franchise
       and affiliate travel agency management business (via the company Global Travel Group).

    9) The Emirates' Group activities in these markets are: (i) the tour operating business  (primarily  long-haul  business)  (via  the  company
       Emirates Holidays), (ii) long-haul package holidays and distributing independent scheduled long-haul flights, hotels and car hire products
       (via the company Gold Medal Travel), (iii) online travel agency distributing primarily short  haul  holiday  products  (including  dynamic
       packages) (via the company Travel Republic) and (iv) online flight only sales (via the company Netflights).

       Parties' view

   10) The Parties submit that their activities overlap in relation to the following markets: (i) the supply of long haul holidays (through their
       respective tour operating businesses Travelbag/Travel2 and Emirates Holidays/Gold Medal); (ii) the distribution of flights to other travel
       agents and consumers (through their respective flight consolidator businesses in Travelbag/Travel2 and Gold  Medal  and  Netflights);  and
       (iii) the distribution of leisure travel services in the United Kingdom (through their online travel agency businesses Sunmaster.co.uk and
       TravelRepublic.co.uk/Netflights.com).

   11) The Parties consider that there is one relevant product market for  the  supply  of  long  haul  holidays,  including  both  packages  and
       independent holidays, and that this market should not be further segmented by online/offline channel of supply. The Parties further  argue
       that a further separation of the market on the basis of the country of destination or holiday type is  not  a  plausible  relevant  market
       definition. Lastly, the Parties consider that the market for the distribution of leisure  travel  services  should  not  be  further  sub-
       segmented according to online/offline channels of distribution or by product type.

       Commission's assessment

   12) In its previous decisions, the Commission considered that tour operators gather several services such as flights, car  rental,  and  hotel
       accommodation from the upstream markets in so-called "package holidays". Downstream, travel agencies  provide  end  customers  with  these
       package holidays. Alternatively, end-customers purchase flights, car rental and  hotel  accommodation  separately,  either  from  upstream
       suppliers (airlines, hotels), or travel agencies (this was defined by the Commission's practice as "independent holidays",  i.e.  holidays
       where the customers purchase individually every piece of their travel)[5]. Upstream, at the wholesale  level,  the  Commission  previously
       defined a separate market for wholesale supply of airline seats to tour operators[6] as well as a  separate  market  for  the  procurement
       markets for hotel accommodation in destination holiday resorts[7].

   13) While leaving the precise market definition open, the Commission has most often defined a market for the distribution of  travel  services
       which was divided into (i) business travel services and (ii) leisure travel services and further subdivided into (i)  offline  (brick-and-
       mortar) travel agency (package holidays, independent holidays) and (ii) online travel agency (package holidays, independent  holidays  and
       leisure flights).[8] Further distinctions between long-haul and short-haul holidays, between "independent" and "package holidays"[9]  were
       also mentioned. Lastly, the Commission envisaged the possibility of segmenting the market for  foreign  package  holidays  (long-haul  and
       short-haul) by holiday type, for example "sun and sea" holidays, "city breaks", or by destination.  However,  in  previous  decisions  the
       Commission did not consider it necessary to make such a further distinction.[10]

   14) In any event, the precise market definition can be left open as the effects of the Transaction would remain the same irrespective  of  the
       market definition adopted.

2 Geographic market definition

   15) The Parties argue that the markets identified above are national in scope. Because of the activities  of  Stella,  the  relevant  national
       market is the United Kingdom.

   16) In previous decisions, the Commission found that the geographic scope of the market was national[11]. For the purposes of  this  decision,
       the Commission will assess the impact of the Transaction in the United Kingdom.

3 Conclusion

   17) In light of the Parties' activities and the Commission's previous decision practice in these markets, the Commission considers that it  is
       relevant to assess the competitive effects due to horizontal overlaps on the following markets: (a) the market  for  the  distribution  of
       travel services further split into (i) the supply of long  haul  holidays  and  (ii)  the  supply  of  short-haul  holidays  and  (b)  the
       distribution of flights to other travel agents and consumers. The Commission also considered possible sub-segmentations of  these  markets
       as described above: online/offline and a wider holiday market (including independent holidays and package holidays)  or  package  holidays
       only. The distinction between leisure and business is not relevant because the Parties do not provide business travel services.

   18) In addition, the Commission assessed the effects of the Transaction because of the vertical relationships between (i) the market  for  the
       wholesale supply of airline seats by Emirates to different categories of customers (tour operators, travel agents and  consolidators)  and
       the market for the distribution of travel services; and (ii) the supply of beds to tour operators and travel agents by Stella (via Triton)
       and the market for the distribution of travel services.

2 Assessment

1 Horizontal overlaps

   19) The Parties submit that on no plausible market definition does the  combined  market  share  approach  20%  and  therefore  there  are  no
       horizontally affected markets. In any event, a number of significant players such as Expedia, Trailfinders or TUI Travel plc will continue
       to operate on the market and constrain the Parties.

   20) On the market for supply of long-haul holidays in the United Kingdom, the combined market share of the Parties does not  exceed  [10-20]%,
       even if this market was further segmented into online and offline supply of long haul holidays.

   21) On the market for supply of long-haul package holidays in the United Kingdom, the combined market share of the Parties does not exceed [5-
       10]%. If this market was further segmented into online and offline supply of long-haul package holidays, the combined market  share  would
       be minimal ([0-5]%) on the online market while on the offline market it would be [10-20]%.

   22) As regards the market for online supply of short-haul holidays in the United Kingdom, the Parties' combined market share is [5-10]%, while
       on the market for online supply of short-haul package holidays in the UK, their combined market share does not exceed [10-20]%. On a wider
       market including also the other distribution channels, their combined market share is minimal ([0-5]%).[12]

   23) On the market for offline distribution of flights in the United Kingdom, their combined market share is below [5-10]% while on the  market
       for online distribution of flights in the UK it reaches merely [0-5]%. Lastly, if any  of  the  markets  were  to  be  defined  on  a  per
       destination basis, the Parties submit that their combined market shares would remain well below 20%.

   24) In light of the above and of all the available evidence, the Commission considers that the Transaction does not lead to  any  horizontally
       affected market on any plausible market, and therefore it does not raise any serious doubts as to  its  compatibility  with  the  internal
       market.

2 Vertical relationships

   25) The Transaction leads to two vertical relationships: (i) the market for the wholesale supply of airline seats  by  Emirates  to  different
       categories of customers (tour operators, travel agents and consolidators) and the market for the distribution of travel services and  (ii)
       the supply of beds to tour operators and travel agents by Stella (via Triton) and the market for the distribution of travel services.

1 Wholesale supply of airline seats and distribution of travel services

   26) On the market for the supply of seats to different categories of customers (tour operators, travel agents and consolidators) in the United
       Kingdom, Emirates' market share is below [10-20]%. When looking at Emirates' share on the supply  of  seats  to  different  categories  of
       customers (tour operators, travel agents and consolidators) in the United Kingdom on the long-haul  segment,  its  market  share  is  [10-
       20]%[13]. However, this market share is likely to be overstated because it excludes services offered by some categories of  carriers  such
       as charter airlines. If one would consider Emirates' position on a route-by-route basis, its market share would be between 30% and 70%  on
       certain holiday routes between London and other parts of the world such as Dubai, Perth (Australia)  or  Mahe  Is  (Seychelles),  etc.  On
       holiday routes departing from regional airports in the United Kingdom (New Castle, Manchester, Glasgow and Birmingham) to other  parts  of
       the world, Emirates would have even larger market shares.

   27) The Commission considered whether the Parties would have the ability and incentive to engage in a  foreclosure  strategy  as  regards  the
       provision of the wholesale supply of airline seats on these destinations and whether there will be any detrimental effect  on  competition
       on the downstream market for the distribution of travel services. The Commission considers that any input or customer foreclosure  can  be
       excluded because of the upstream presence of other competing carriers on these routes as well as the limited presence of  the  Parties  on
       the downstream market for the distribution of travel services (whatever the segmentation) post Transaction.

   28) As mentioned above, on a UK-wide market for the provision of airline seats to different categories of customers  (tour  operators,  travel
       agents and consolidators), Emirates' market share is limited, even when looking only at long-haul destinations. On  route-by-route  basis,
       other carriers such as British Airways, Virgin Atlantic, Virgin Australia,  Qatar  Airlines  offer  direct  services  and  numerous  other
       indirect services are also available. Tour operators and travel agents will therefore have sufficient  alternatives  available  for  their
       offerings of package holidays. Emirates will not have the incentive to foreclose access to the competitors of the Parties to its seats  on
       destinations ex-the United Kingdom as the sales of Emirates to the Parties represent only a rather small share of Emirates' sales of seats
       to travel agents and tour operators. Indeed in 2013, Emirates sold the overwhelming majority of its seats to competitors  of  the  Parties
       while the sales to the Parties accounted for a small share on all flights ex-the United Kingdom[14].

   29) In any event, the Parties' customers are leisure passengers which will likely be more flexible in their choice of holiday destination  and
       will therefore likely consider more than one destination when making their choice. In fact, travel agents and tour operators in the United
       Kingdom offer distribution of travel services to a number of destinations worldwide. For instance, the Parties' share of  acquisitions  of
       airline seats to long-haul destinations from Emirates amounted to only [10-20]% in 2013. In addition, the United Arab  Emirates  does  not
       appear as a top long-haul holiday destination for passengers travelling from the United Kingdom. Holidays to the United States continue to
       dominate the long-haul market with a share of 27% followed by other destinations such as  Tunisia,  Mexico  and  Egypt,  while  the  share
       represented by travel to the United Arab Emirates was only 5%[15].

2 Supply of beds to tour operators and travel agents and distribution of travel services

   30) On the market for the provision of hotel accommodation to tour operators and travel agents, the presence of  Triton  is  minimal  (in  any
       event not leading to a vertically affected market). The Parties' presence on the market for the  distribution  of  travel  services  stays
       below 20% as explained above. No customer or input foreclosure can therefore be expected.

3 Conclusion on vertical relationships

   31) In light of the above and of all the available evidence, the Commission considers that the  Transaction  does  not  raise  serious  doubts
       because of these vertical relationships.

       CONCLUSION

   32) 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.

For the Commission

(signed)
Joaquín ALMUNIA
Vice-President
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[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
('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]   The Emirates Group consists of dnata, Emirates, a further sister company, dnata World Travel, and their various subsidiaries.

[3]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
      C95, 16.04.2008, p1).

[4]   This turnover corresponds to the Emirates Group. In any event, ICD and Stella have an aggregate EU-wide turnover above EUR 5 000 million.

[5]   See inter alia Commission decisions n° M.5038 – Telefónica/Turmed/Rumbo of 28 February 2008, paragraph 9; M.4600 - TUI/ First Choice  of  4
      June 2007, paragraph 12 et seq.; M.4234 – Carlson/One Equity  Partners/Carlson  Wagonlit  of  3  July  2006,  paragraph  12  and  M.1524  –
      Airtours/First Choice of 22 September 1999, paragraph 5 et seq.

[6]   Commission decision n° M.5867 – Thomas Cook / Öger Tours of 14 September 2010, paragraph 15.

[7]   Commission decision n° M.4601 – KarstadtQuelle / MyTravel of 4 May 2007, paragraph 46.

[8]   Commission decisions n° M.6163 – AXA/Permira/Opodo/Go Voyages/E-dreams of 30 May 2011, paragraphs 18 et seq.; M.5996 –  Thomas  Cook/Travel
      Business of co-operative group/Travel Business of Midlands Society of 6 January 2011, paragraph 28.

[9]   Commission decision n° M.5867 – Thomas Cook / Öger Tours of 14 September 2010, paragraph 10.

[10]  Commission decision n° M.4601 – KarstadtQuelle / MyTravel of 4 May 2007, paragraph 25.

[11]  Commission decisions n° M.5867 – Thomas Cook / Öger Tours of  14  September  2010,  paragraph  11  and  n°  M.6163  –  AXA/Permira/Opodo/Go
Voyages/E-dreams of 30 May 2011, paragraphs 29 et seq.

[12]  Travel Republic and Sunmaster are both online travel agencies, focusing on the short haul holidays segment,  principally  to  Mediterranean
      destinations.

[13]  Even if one were to assess Emirates' position on the supply of seats to tour operators ([10-20]%) or travel agents  ([10-20]%)  separately,
their share would remain below 30%.

[14]  Even if one would consider flights from individual airports in the United Kingdom (New Castle, Manchester,  Glasgow  and  Birmingham),  the
share would remain below [10-20]%.

[15]  Mintel Report, Long-haul Holidays UK, March 2014, page 38. Annex 8 to the Form CO.

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                                                                  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.

                                                                 MERGER PROCEDURE