CELEX: 32017M8416
Language: en
Date: 2017-07-17 00:00:00
Title: Commission Decision of 17/07/2017 declaring a concentration to be compatible with the common market (Case No COMP/M.8416 - THE PRICELINE GROUP / MOMONDO GROUP HOLDINGS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
  In the published version of this decision, some                Brussels,17.7.2017
  information has been omitted pursuant to Article               C(2017) 5150 final
  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                      PUBLIC VERSION
  omitted has been replaced by ranges of figures or a
  general description.
                                                                 To the notifying party:
Dear Sir/Madam,
Subject:        Case M.8416 – The Priceline Group / Momondo Group Holdings
                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
(1)         On 12 June 2017, the Commission received a notification of a proposed
            concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by
            which the undertaking The Priceline Group Inc. ("Priceline", United States)
            acquires within the meaning of Article 3(1)b of the Merger Regulation sole control
            over Momondo group Holdings Limited ("Momondo", United Kingdom), by way
            of purchase of shares ("the Transaction").3
(2)         Priceline and Momondo will also be referred to below as the "Parties".
1.          THE PARTIES AND THE OPERATION
(3)         Priceline is active in the supply of online travel and related services, notably
            through metasearch sites ("MSS") and online travel agents ("OTAs"), in 224
            countries and territories in Europe, North America, South America, the Asia-
            Pacific region, Middle East and Africa. Its core brands include the MSS brand
            KAYAK, also operating under the Swoodoo and Checkfelix brands, and the OTA
            brands Booking.com, priceline.com, agoda.com, Rentalcars.com and Opentable.
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') 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 197, 21.06.2017, p.25.
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--- (4)    Momondo offers services in the online travel sector in 35 international markets
       with an EEA focus on the Nordic region. It owns two MSS, namely Cheapflights
       and Momondo.
(5)    Priceline will acquire 100% of the issued capital of Momondo through a private
       acquisition.
(6)    Consequently, the Transaction results in the acquisition of sole control within the
       meaning of Article 3(1)(b) of the EUMR.
2.     EU DIMENSION
(7)    The Transaction was referred to the Commission under Article 4(5) following the
       notifying party's request. The Transaction was capable of being reviewed under the
       national competition laws in Austria, Cyprus, Germany and the UK, which didn't
       express their disagreement to the request to refer the case. Therefore the concentration
       is deemed to have an EU dimension.
3.     MARKET DEFINITION
3.1.   The Parties' activities
(8)    Priceline is an integrated group active worldwide in online travel intermediation. In
       the EEA, Priceline operates MSS for flights, hotels and car rentals under the
       Kayak, Swoodoo and Checkfelix brands (together "KAYAK").4 Priceline also
       operates OTAs in the EEA: Booking.com, specialising in hotel bookings, and
       Rentalcars.com, specialising in car rentals.
(9)    Priceline's MSS and OTAs also provide commercial affiliate programmes at global
       level.
(10)   Through their commercial affiliate programmes, Priceline's MSS provide access to
       their search and comparison technology to third party websites, such as other
       smaller MSS, general travel websites, travel blogs, etc. that wish to offer
       comparison services to their visitors. Through the commercial affiliate programme,
       visitors to the affiliate's website can search for and compare flights, hotels and car
       rentals, as if they were visiting the website of the Priceline MSS that is offering the
       commercial affiliate programme.
(11)   Similarly, Priceline's OTAs provide access to their search, compare and booking
       functionality to third parties through their commercial affiliate programmes. The
       affiliates of Priceline's OTAs are notably smaller OTAs and TSPs wishing to
       combine their offering with other travel services, e.g. airlines wishing to offer hotel
       accommodation, hotels wishing to offer car rentals, etc. Priceline's OTAs also offer
       their commercial affiliate programmes to MSS that wish to provide booking
       functionality on their websites in addition to comparison services. Visitors to the
       affiliates' websites can search for and book travel services from Priceline's OTAs,
       as if they were visiting the Priceline websites.
4    KAYAK also offers MSS services for package holidays; this activity is however ancillary to the
     flights and hotels MSS.
                                                  2
 ---pagebreak--- (12)   Under their commercial affiliate programmes, Priceline's MSS and OTAs enter into
       revenue-sharing agreements with their affiliates, whereby Priceline's MSS and
       OTAs share with the affiliates a percentage of the commission they generate
       through referrals from the affiliates.
(13)   Momondo operates two MSS, both also active in the EEA. Momondo's MSS are
       active in flights, where they have established their own inventory through
       cooperation with flights OTAs, airlines etc. Momondo also offers hotels MSS,
       however this is powered through a commercial affiliate programme offered by
       HotelsCombined, a hotels MSS. Momondo is not active in the provision of car
       rental MSS. Instead, it has entered into a commercial affiliate programme provided
       by CarTrawler, a car rental OTA. Therefore, as regards car rental, Momondo
       effectively provides OTA services to its users. However, all car rental bookings are
       re-directed to the CarTrawler website and handled by CarTrawler and not
       Momondo.5
(14)   Momondo also offers commercial affiliate programmes for flights MSS.
(15)   Therefore, the Transaction would give rise to horizontal overlaps and vertical
       relationships in the following activities of the Parties:6
          i.     horizontal overlaps in the operation of flights MSS and hotels MSS
                 websites;
         ii.     horizontal overlaps in the operation of car rental OTAs;
        iii.     horizontal overlaps in the provision of commercial affiliate programmes for
                 flights MSS;
        iv.      potential vertical relationship between the operation of MSS for flights,
                 hotels, car rentals and the operation of OTAs for flights, hotels, car rentals;
         v.      potential vertical relationship between the operation of flights MSS and the
                 provision of flights MSS commercial affiliate programmes, as well as the
                 operation of hotels MSS and the provision of hotels MSS commercial
                 affiliate programmes;
        vi.      potential vertical relationship between the operation of car rental OTAs and
                 the provision of car rental OTA commercial affiliate programmes.
5    Momondo also displays package holiday products provided by OTAs and tour operators on its
     websites on the basis of commercial affiliate relationship with Reisegiganten; it does not, however,
     provide comparison services for these products. Moreover, this activity of Momondo is ancillary to
     the main services it provides, having generated only EUR […] in the EEA in 2016.
6    Priceline and Momondo also offer search and comparison services on their MSS websites for package
     holidays; however, due to the nature of the package holiday products, they merely display the offers
     of OTAs and tour operators. Rarely is the exact same package holiday offered by more than one
     provider, and, therefore, it is not possible to provide price comparison for the exact same product.
     Momondo only offers package holidays MSS in Denmark, Norway and Sweden in the EEA,
     generating approximately EUR […] through this activity, which corresponds to less than […]% of its
     turnover in these countries. KAYAK's revenues from package holidays in Denmark, Norway and
     Sweden correspond to less than […]% of its total revenues in these countries. Therefore, the Parties'
     activities in relation to package holidays will not be further analysed in this Decision.
                                                         3
 ---pagebreak--- 3.2.     Relevant product markets
3.2.1.   Online travel intermediation
(16)     The Parties are active in the online travel sector. In its previous decision practice,
         the Commission considered whether online travel markets form part of a broader
         "dynamic market" comprising the services provided by all suppliers of the travel
         industry's value chain, i.e. suppliers of different kinds of travel services, tour
         operators, brick-and-mortar and online travel agents and other travel
         intermediaries. Ultimately, the Commission left the market definition open.7
(17)     The online travel sector is characterised by a multitude of players at various levels
         of the value chain. Among the main ones are:
               i.   travel service providers ("TSPs"), such as airlines, hotel operators, car
                    rental companies or other transport service suppliers. For the purposes of
                    this Decision, tour operators, which create tourism products by
                    purchasing individual travel products and combining them into package
                    holidays, will also be considered as TSPs;
              ii.   online travel agents ("OTAs"), namely online retailers which sell one or
                    more types of travel service, supplied by a range of TSPs, such as flights,
                    hotel and other travel accommodation and car rental. OTAs provide, on
                    the one hand, search, compare and booking services to consumers and, on
                    the other hand, marketing services and booking functionality to TSPs;8
             iii.   metasearch sites ("MSS"), namely websites which aggregate information
                    relating to one or more types of travel service. MSS provide, on the one
                    hand, search and comparison services to consumers and allow them to
                    compare offers for the same travel product made by the TSP and/or by
                    one or more OTAs. On the other hand, MSS provide lead generation
                    services to TSPs and OTAs.9
(18)     The majority of respondents to the market investigation taking a position
         considered that the distribution of travel services through online channels
         constitutes a separate market from the distribution of travel services through other
         channels.10
(19)     In light of the above, the Commission found evidence pointing towards the
         existence of a separate market for the online intermediation of travel services.
7      Case M.8046 – TUI/Transat France, para. 13 and following; Case M.6163 - AXA/ PERMIRA/
       OPODO/ GO VOYAGES/EDREAMS, para.18 and following (with a focus on flights); M.4601 -
       KarstadtQuelle/ MyTravel, recital 21 and following (with a focus on leisure travel only).
8      For ease of reference, in this Decision, end users of MSS and OTAs are referred to as consumers,
       even though some end users may in fact be corporate travellers.
9      MSS generally re-direct users to a TSP or OTA website in order to complete their booking, however
       some MSS have recently begun to offer a direct booking function, allowing the user to complete the
       transaction without leaving the MSS website.
10     Replies to Q1 – Questionnaire to MSS, question 6; Q2 – Questionnaire to OTAs, question 5; Q3 –
       Questionnaire to TSPs, question 6; Q4 – Questionnaire to Consumer Associations, question 3.
                                                        4
 ---pagebreak---          However, as the Parties are only active in online intermediation, and the
         Transaction would not raise serious doubts under any plausible market definition,
         for the purposes of this Decision, it may be left open whether the intermediation of
         travel services online constitutes a separate market from the intermediation of
         travel services through brick-and-mortar outlets.
(20)     Therefore, for the purposes of this Decision, the Commission concludes that it may
         be left open whether there is a distinct market for the online intermediation of
         travel services. The Commission will assess the impact of the Transaction only on
         the narrower possible markets for the intermediation of travel services online, in
         which the Parties are active.
3.2.2.   Distinction between general and specialised search engines
(21)     In its prior decision practice, the Commission has concluded that internet general
         search should be distinguished from specialised search, which focuses on specific
         segments of online content, such as for example travel search engines.11
(22)     The Parties also note that, although consumers do use general search to look for
         travel services, the results thus generated are very different from the comparison
         services offered by MSS. The Parties view Google's specialised travel services
         Google Flights and Google Hotels as competing MSS operators and not as part of
         the general search service provided by Google.
(23)     As the Parties only overlap in the operation of specialised search engines focussed
         on travel, the impact of the Transaction will be assessed on markets for travel
         search engines.
3.2.3.   Distinction between MSS and OTAs
3.2.3.1. Commission and national competition authorities' decision practice
(24)     The Commission has not defined markets for travel MSS in its past decision
         practice. MSS were considered in a previous decision, in which the Commission
         pointed out that MSS aggregate and compare fares, but do not offer booking
         capabilities, instead channelling consumers to TSPs or travel agents offering the
         best fares. However, the Commission did not define the market on which MSS
         operate.12
(25)     In its previous decision practice, the Commission has considered distinct markets
         for the provision of travel agency services.13
(26)     National competition authorities have also looked into the online travel sector. The
         UK national competition authority has looked into MSS markets in its assessment
         of the acquisition of KAYAK by Priceline, assessing the impact of the merger on
         the supply of online travel search services to UK consumers and the supply of
11      Case M.5727 – Microsoft/ Yahoo! Search Business, para.31.
12      Case M.4523- Travelport/Worldspan, para. 31-33; the Commission concluded that MSS should not
        be included in the same relevant product market as global distribution system operators (GDSs).
13      Cases M.8046 – TUI/Transat France, para. 13, M.4601 - KarstadtQuelle/My Travel, para. 30-31.
                                                         5
 ---pagebreak---           online lead generation services to TSPs, without ultimately defining MSS markets.
          In its assessment, the UK national competition authority considered that MSS and
          OTAs are both in a vertical relationship and compete with each other, as they both
          seek to obtain traffic by providing online travel search services to consumers and
          online lead generation services to TSPs. However, in that decision, the OFT did not
          conclude on the precise market definition and analysed competition between OTAs
          and MSS only “on a cautious basis”, finding that, even in a potential market
          including both OTAs and MSS, an OTA and a MSS “are not in fact close
          competitors”.14
(27)      Conversely, in their antitrust decisions assessing most-favoured nation clauses in
          contracts for the online distribution of hotel accommodation, the German, French,
          Italian, Swedish and Swiss competition authorities and the Düsseldorf appeal court
          in Germany treated OTAs specialising in the distribution of hotel accommodation
          as belonging to a distinct market, implicitly or explicitly excluding MSS.15
3.2.3.2. Parties' views
(28)      The Parties submit that MSS are active on a two-sided market, offering, on the one
          hand, online travel search services to consumers and, on the other hand, online lead
          generation services to TSPs and OTAs.
(29)      The Parties argue that MSS are not alternatives to OTAs for either consumers or
          for TSPs, and should therefore not be included in the same market, for the
          following reasons.
(30)      First, OTAs offer booking functionality to consumers, whereas MSS typically do
          not. While some MSS, including all KAYAK brands, allow consumers to book
          through a booking function embedded in the MSS interface, that functionality is
          actually provided by OTAs or TSPs, and the transaction is in fact completed on the
          platforms of the latter. Therefore, for TSPs whose website does not include a
          booking functionality, MSS would not be an alternative to OTAs, as consumers
          would not be able to complete their booking on the MSS platform.
(31)      Second, the payment model adopted by most MSS is different from that of OTAs.
          MSS typically operate a "pay-per-click model", whereby TSPs and OTAs pay a fee
          to the MSS for each referral to their own websites, irrespective of whether the
          referral leads to a booking. OTAs, on the other hand, usually operate a "pay-per-
          acquisition" model, whereby TSPs pay a fee for each completed booking that is
          facilitated by the OTA. The payment model used by most MSS entails a higher
          financial risk for TSPs than that used by OTAs, since the TSP is likely to pay fees
          for referrals that do not result in actual bookings.
14      OFT decision of 14 May 2013 (ME/5882-12) on the anticipated acquisition by Priceline.Com of
        Kayak Software Corporation, para.14 and following.
15      German national competition authority's decisions of 20 December 2013 and 23 December 2015
        addressed to HRS and Booking.com respectively; French, Italian and Swedish national competition
        authorities' decisions of 15-21 April 2015 addressed to Booking.com; Swiss national competition
        authority's decision of 19 October 2015 addressed to Booking.com, Expedia, Inc and HRS; judgment
        of Düsseldorf Higher Regional Court of 9 January 2015, HRS vs Bundeskartellamt.
                                                        6
 ---pagebreak--- (32)      Third, the customer base of MSS is broader, as it includes TSPs and OTAs,
          whereas OTAs do not list the offerings of rival OTAs on their websites. Moreover,
          the Parties submit that the majority of MSS revenues is generated through referrals
          to OTAs.
(33)      Fourth, MSS offer consumers the possibility to compare the prices offered by
          multiple OTAs and TSPs for the same travel service, such as a specific type of
          hotel room in a particular hotel on a particular date. Conversely, OTAs only display
          the offers of the TSPs that may be booked through the OTA; they do not display
          the prices offered by rival OTAs for the same travel service.
3.2.3.3. Commission's assessment
(34)      Respondents to the market investigation were rather split as to whether MSS and
          OTAs should be viewed as belonging to the same market.
(35)      When asked whether the services offered by MSS to consumers and to TSPs should
          be distinguished from those offered by OTAs, respondents were rather split as to
          whether the services offered by MSS are interchangeable with those of OTAs.16
(36)      Respondents who considered that MSS should be distinguished from OTAs pointed
          out that OTAs act as agents of TSPs, whereas MSS act merely as advertisers; that
          MSS provide the first step in the consumer journey, which is then often completed
          through a booking on OTA websites; that MSS offer a much broader comparison,
          displaying offers from multiple distribution channels and enabling consumers to
          compare prices for the same travel product, whereas OTAs only enable consumers
          to compare different travel products; that OTAs have a more direct relationship
          with consumers, providing additional services, such as call centres and after-sales
          support; and that even when the MSS offer some booking functionality, this is
          actually still powered by an OTA or TSP.
(37)      Moreover, MSS which responded to the market investigation indicated that for an
          MSS to start offering services similar to an OTA, significant time and investment
          would be required. The MSS would have to develop a deeper cooperation with
          TSPs, on the basis of an agency model, invest in software solutions allowing it to
          process bookings and payments, provide customer service, and in some cases also
          register as a travel agency and acquire related licences. Some MSS also noted that
          such a change would not make commercial sense, as MSS' reputation of presenting
          price comparison results in a neutral way could be compromised, and such a
          change in the business model would be unlikely to be welcomed by the market.
          Last, MSS that provided information on their revenue sources appeared to generate
          most of their income from their relationships with OTAs and only a small share
          from TSPs.17
(38)      Respondents who considered that both types of services are interchangeable
          referred to the fact that both MSS and OTAs compete to attract consumers'
16      Replies to Q1 – Questionnaire to MSS, questions 7 and 8; Q2 – Questionnaire to OTAs, questions 7
        and 8; Q3 – Questionnaire to TSPs, questions 7 and 8; Q4 – Questionnaire to Consumer Associations,
        question 3.
17      Replies to Q1 – Questionnaire to MSS, question 3.
                                                        7
 ---pagebreak---           attention and lead them to their websites through a variety of channels; that
          consumers often do not realise that they are not completing their booking on the
          MSS website, and thus see MSS as interchangeable with OTAs; and that an
          increasing number of MSS have begun to offer booking functionalities on their
          websites. However, even respondents who considered that the two types of services
          are interchangeable from the point of view of consumers pointed out that OTAs
          offer additional services, such as the completion and management of bookings and
          payments, after-sales support and other customer services.
(39)      In light of the above, the Commission considers that even though MSS and OTAs
          are both active in the intermediation of travel services online and both aim to
          attract consumers interested in organising their travel, they appear to offer different
          services and generally operate on the basis of different business models. As the
          Transaction would not raise serious doubts, either on the basis of distinct markets
          for MSS and OTAs or on the basis of a broader market comprising both MSS and
          OTAs, the exact scope of the product market may be left open for the purposes of
          this Decision.
3.2.3.4. Conclusion
(40)      Therefore, for the purposes of this Decision, the Commission concludes that it may
          be left open whether there are distinct markets for MSS and OTAs. The
          Commission will therefore assess the impact of the Transaction both on markets for
          MSS only and on broader markets comprising both MSS and OTAs.
3.2.4.    Segmentation of MSS and OTA markets by type of travel services
3.2.4.1. Commission and national competition authorities' decision practice
(41)      In its prior decision practice, the Commission considered that the online
          distribution of travel services could be further segmented by type of travel
          products, between flights, hotels, package holidays, etc. though ultimately the exact
          definition of the product market was left open.18
(42)      National competition authorities have also distinguished between hotels, flights and
          car rentals, considering that these are not interchangeable from the consumer's
          point of view and observing that MSS and OTAs often specialise in one type of
          travel services, even if there is some complementarity between the different types
          of travel services from the supply side, as consumers may prefer to organise their
          entire journey or holiday in a "one-stop" shop.19
3.2.4.2. Parties' views
(43)      The Parties claim that, even though in the past most online travel intermediaries
          focussed on a specific type of travel service, such as flights, hotels, car rentals, etc.,
18      Cases M.8046 – TUI/Transat France, para. 101; M.6163 - AXA/ PERMIRA/ OPODO/ GO
        VOYAGES/EDREAMS, para.18 and following.
19      Illustratively, OFT decision of 14 May 2013 (ME/5882-12) on the anticipated acquisition by
        Priceline.Com of Kayak Software Corporation, para.31; German national competition authority's
        decisions of 20 December 2013 and 23 December 2015 addressed to HRS and Booking.com
        respectively.
                                                    8
 ---pagebreak---           in recent years, there has been significant convergence in the sector, as MSS and
          OTAs which originally focussed on one type of travel services have expanded their
          activities to enable consumers to complete their bookings for multiple travel
          services on a single website. Therefore, in the Parties' view, the markets for MSS
          and for OTAs are broader, comprising all types of travel services.20
3.2.4.3. Commission's assessment
(44)      The majority of respondents to the market investigation consider that the markets
          for MSS and OTAs should be further segmented by type of travel service,
          identifying distinct segments for flights, hotels, car rentals and package holidays.21
(45)      A limited number of respondents who consider that the markets for online travel
          intermediation should not be further segmented by type of travel services argue that
          MSS or OTAs specialising in only one type of travel service are in competition
          with respectively those MSS or OTAs that offer a broader range of travel services;
          that the business model and technology required to offer online intermediation
          services for different types of travel services is comparable, and that even though
          not identical, different types of travel services are complementary and thus likely to
          be sourced together by consumers.
(46)      Among the majority of respondents who consider that narrower markets for each
          type of travel services should be taken into account, several point out that
          intermediation for one type of travel service (such as flights) is not substitutable to
          intermediation for a different type of service (such as hotels); that consumers often
          search for each type of travel service at different points in time and using different
          intermediaries; that several MSS and OTAs - including some well-known ones -
          specialise in only one type of travel service, and that MSS and OTAs use different
          marketing techniques for each type of travel services.
(47)      Moreover, when asked whether they could easily expand their activity from one
          type of travel service to another, the MSS that responded to the market
          investigation were rather split. Some respondents noted that they could expand
          using their current business model and technology, and by establishing commercial
          relationships (notably through commercial affiliate programmes) with
          intermediaries already active in the type of travel service into which they wished to
          expand. Other respondents pointed out that new interfaces, new partners, additional
          expertise in the new type of product and marketing activities to build a new
          customer base would be required.22
20      The Parties also submit that for certain types of travel services, namely flights and car rentals, OTAs
        are on the same market with, respectively, airlines and car rental companies. These TSPs typically
        offer booking functionalities on their websites and thus compete with OTAs for consumers wishing to
        complete their reservation online. If a narrower market for OTA-only car rental services were
        considered, the Transaction would give rise to affected markets in all EEA countries. However, the
        increment resulting from the Transaction would be <[0-5]% in all markets; therefore, these narrower
        potential markets will not be analysed further.
21      Replies to Q1 – Questionnaire to MSS, question 9; Q2 – Questionnaire to OTAs, questions 9-10; Q3
        – Questionnaire to TSPs, question 9 and question 11; Q4 – Questionnaire to Consumer associations,
        question 4.
22      Replies to Q1 – Questionnaire to MSS, question 10.
                                                           9
 ---pagebreak--- (48)     Conversely, the majority of OTAs that responded to the market investigation
         considered that an expansion of their activities into another type of travel service
         would be difficult, as expenses would be required to connect to new databases for
         providing inventory for the new type of service, different technology and a
         different business model would be required, and product-specific knowledge and
         market analysis on how to target consumers interested in the new type of travel
         services would have to be developed.23
(49)     Last, when asked about the scope of the contracts concluded between MSS and
         OTAs, the majority of MSS and OTAs that responded to the market investigation
         indicated that they negotiate separately for each type of travel service, even when
         both contracting parties provide intermediation for more than one type of travel
         service.24
(50)     In light of the above, the Commission considers that segmenting MSS and OTA
         markets by different types of travel service should be considered. However, as the
         Transaction would not raise serious doubts, irrespective of whether broader
         markets comprising "all travel" MSS or OTA services are taken into account, or
         narrower segments for each of flights, hotels, car rentals and package holidays, the
         exact delineation of the relevant product markets may be left open.
3.2.4.4. Conclusion
(51)     Therefore, for the purposes of this Decision, the Commission concludes that it may
         be left open whether MSS and OTA markets should be further segmented based on
         the type of travel service they intermediate. The Commission will therefore assess
         the impact of the Transaction on markets for flights MSS, hotels MSS, and car
         rentals MSS and a broader market for "all travel" MSS, as well as on markets for
         flights OTAs, hotels OTAs, and car rental OTAs and a broader market for "all
         travel" OTAs.
3.2.5.   Commercial affiliate programmes
(52)     In its previous decision practice, the Commission has not assessed commercial
         affiliate programmes in the travel sector.
(53)     The Parties submit that commercial affiliate programmes offered by MSS are not in
         competition with those offered by OTAs. As MSS and OTAs provide their affiliate
         partners with access to their content and functionalities, the different business
         models of MSS and OTAs are mirrored in the commercial affiliate programmes
         they offer. Moreover, the Parties submit that the companies that enter into the
         commercial affiliate programmes offered by MSS are different from those which
         enter into the commercial affiliate programmes offered by OTAs. Companies
         which enter into affiliate programmes offered by MSS wish to offer consumers
         broad comparison services. These companies are typically general travel websites,
         travel blogs, small MSS entering new markets, etc. By contrast, companies which
         enter into affiliate programmes offered by OTAs wish to offer consumers the
23      Replies to Q2 – Questionnaire to OTAs, question 13.
24      Replies to Q1 – Questionnaire to MSS, question 11; Replies to Q2 – Questionnaire to OTAs,
        question 14.
                                                       10
 ---pagebreak---          possibility to complete their travel bookings on a single website, such as TSPs
         which offer only one type of travel services (e.g. airlines which wish to also offer
         hotel or car rental bookings), or smaller OTAs wishing to expand, possibly into
         new travel service segments. Moreover, the Parties consider that commercial
         affiliate programmes should not be further segmented by type of travel service.
(54)     The majority of respondents to the market investigation considered that the
         provision of commercial affiliate programmes by MSS is part of the overall market
         for the operation of MSS, notably as they view these programmes as an additional
         means for MSS to increase traffic to their websites.25
(55)     Respondents are split as to whether commercial affiliate programmes offered by
         MSS are interchangeable with commercial affiliate programmes offered by OTAs.
         Some respondents point out the differences in the type of services offered by MSS
         and OTAs, whereas others indicate that they considered both OTAs and MSS when
         selecting the commercial affiliate programme they entered into, or that they have
         entered into affiliate programmes offered by both MSS and OTAs.26
(56)     Last, respondents to the market investigation are rather split as to whether
         commercial affiliate programmes should be further segmented on the basis of the
         type of travel services they cover, namely between flights, hotels and car rentals.27
(57)     In any event, the Commission considers that it may be left open whether
         commercial affiliate programmes constitute a distinct market or are part of broader
         markets for the operation of MSS and OTAs, Similarly, it may be left open whether
         potential markets for commercial affiliate programmes should be further
         segmented, based on whether these are offered by MSS or OTAs, or by type of
         travel services. This is because the Transaction would not raise serious doubts,
         irrespective of whether any of these further possible segmentations are taken into
         account.
3.2.5.1. Conclusion
(58)     Therefore, the Commission concludes that, for the purposes of this Decision,
         whether there are distinct markets for the provision of commercial affiliate
         programmes by MSS and OTAs and the exact delineation thereof can be left open,
         as the Transaction does not raise serious doubts under any such plausible product
         market definition. The Commission will therefore assess the impact of the
         Transaction on potential markets for commercial affiliate programmes offered by
         MSS, by OTAs, and on broader potential markets for commercial affiliate
         programmes offered by both MSS and OTAs. Similarly, the Commission will
         assess the impact of the Transaction on potential markets for commercial affiliate
         programmes for flights, for hotels and for car rentals, as well as on broader
25      Replies to Q1 – Questionnaire to MSS, question 15; Q2 – Questionnaire to OTAs, question 18; Q3 –
        Questionnaire to TSPs, question 14.
26      Replies to Q1 – Questionnaire to MSS, question 16; Q2 – Questionnaire to OTAs, question 19; Q3 –
        Questionnaire to TSPs, question 15.
27      Replies to Q1 – Questionnaire to MSS, question 17; Q2 – Questionnaire to OTAs, question 20; Q3 –
        Questionnaire to TSPs, question 16.
                                                      11
 ---pagebreak---           potential markets for commercial affiliate programmes for all types of travel
          services.
3.3.      Relevant geographic markets
3.3.1.    MSS and OTA markets
3.3.1.1. Commission and national competition authorities' decision practice
(59)      In its previous decision practice in the travel sector, the Commission has
          considered that, notably due to language barriers, markets for the distribution of
          various types of travel services are likely to be national.28
(60)      National competition authorities in the EEA have also assessed markets for MSS
          and OTAs on a national basis; several of them, however, with a focus on hotel
          OTAs.29
3.3.1.2. Parties' views
(61)      The Parties submit that most major MSS, OTAs and TSPs are active on an EEA or
          global basis. Moreover, smaller players which originally had a national focus seek
          to expand their activities also to other EEA regions. Therefore, the Parties consider
          that the geographic scope of MSS and OTA markets may be broader than national.
3.3.1.3. Commission's assessment
(62)      The majority of MSS that responded to the market investigation considered that
          competition among MSS takes place at global level. However, several respondents
          specified that MSS compete both at global level, mainly with other major MSS for
          brand awareness, and at national level also with domestic MSS to increase their
          traffic in specific countries.30
(63)      The majority of MSS that responded to the market investigation also indicated that
          they differentiate their products between countries. Some respondents noted that
          they are active only in one or only in some EEA countries. Other respondents, with
          a broader geographic footprint, explained that they operate in different languages,
          provide price information in different currencies, cooperate with different TSPs and
          OTAs, and adjust the results they display according to their relevance for the
          specific country.31 Conversely, the majority of respondent OTAs and TSPs
          indicated that they purchase the same type of MSS services across the EEA,
28      See among others, Cases M.8046 - TUI/Transat, para. 104 and following; M.6163 - AXA/
        PERMIRA/ OPODO/ GO VOYAGES/EDREAMS, para 29 and following.
29      German national competition authority's decisions of 20 December 2013 and 23 December 2015
        addressed to HRS and Booking.com respectively; French, Italian and Swedish national competition
        authorities' decisions of 15-21 April 2015 addressed to Booking.com.
30      Replies to Q1 – Questionnaire to MSS, question 19.
31      Replies to Q1 – Questionnaire to MSS, question 21.
                                                         12
 ---pagebreak---       notwithstanding differences in language or in prices and revenue-sharing
      arrangements.32
(64)  The majority of OTAs that responded to the market investigation said that they
      offer the same type of services across the EEA, without differentiating between the
      various EEA countries. A number of respondents acknowledge, however, that they
      are active only in some EEA countries, or that they make adjustments to the
      services they provide, in terms of language, payment systems, ancillary services
      and inventory.33
(65)  When asked about their ability to expand to other EEA countries, the majority of
      MSS that responded to the market investigation said that it would depend on
      certain factors. On the one hand, such expansion would not require significant
      investment in terms of the product offered and the technology used. On the other
      hand, an MSS which wished to begin operating in a new EEA country would have
      to invest in building relationships with TSPs that serve that country and on
      advertisement and marketing activities to raise awareness of its brand.34
(66)  When asked about their ability to expand their activities to other EEA countries,
      respondent OTAs were rather split, some noting that even if they could start
      operations, raising awareness of their brand and establishing a customer base in a
      new country could be challenging. Moreover, they might need to make some
      further adjustments, such as adapting their payment systems to comply with
      national regulation, and ensuring local support for customer services.35
(67)  As regards the contracts between MSS and OTAs, the majority of respondents to
      the market investigation said that the contracts are global in scope.36 However,
      when asked about the geographic level at which prices or revenue-sharing
      arrangements are determined, the majority of respondents noted that these are
      decided at country level.37 TSPs describe their contracts with MSS and OTAs as
      global in scope, however their responses are split as regards the geographic scope
      of the payment arrangements, as some indicate that the same arrangement applies
      world-wide, whereas others point out that payments are based on a bidding process
      and therefore amounts may vary significantly or that ad hoc agreements are made
      for specific countries.38
(68)  As the Transaction would not raise serious doubts, irrespective of whether global,
      EEA-wide or national markets are taken into account, the exact delineation of the
      geographic markets may be left open.
32   Replies to Q2 – Questionnaire to OTAs, question 24; Q3 – Questionnaire to TSPs, question 20.
33   Replies to Q2 – Questionnaire to OTAs, question 23.
34   Replies to Q1 – Questionnaire to MSS, question 23.
35   Replies to Q2 – Questionnaire to OTAs, question 26.
36   Replies to Q1 – Questionnaire to MSS, question 20; Q2 – Questionnaire to OTAs, question 22; Q3 –
     Questionnaire to TSPs, question 15.
37   Replies to Q1 – Questionnaire to MSS, question 22; Q2 – Questionnaire to OTAs, question 25.
38   Replies to Q3 – Questionnaire to TSPs, question 19 and question 21.
                                                     13
 ---pagebreak--- 3.3.1.4. Conclusion
(69)     Therefore, for the purposes of this Decision, the Commission concludes that the
         exact geographic scope of MSS and OTA markets may be left open. The
         Commission will assess the impact of the Transaction at global, EEA-wide and
         national level.
3.3.2.   Commercial affiliate programmes
(70)     The Parties submit that markets for commercial affiliate programmes are at least
         EEA-wide, as travel companies which wish to enter into a commercial affiliate
         programme are interested in the content and scale of the inventory, and the
         functionalities offered by the provider of the commercial affiliate programme and
         not in the provider's market position in a specific EEA country. Moreover, the
         companies which offer commercial affiliate programmes are often larger
         companies with a global presence and the agreements they enter into to provide
         commercial affiliate services usually cover multiple countries, if not the world, as
         for example the commercial affiliate agreement between Momondo and the OTA
         HotelsCombined, under which Momondo obtains hotel inventory and booking
         functionality from HotelsCombined.
(71)     The majority of respondents to the market investigation also indicated that the
         scope of the commercial affiliate programmes they offer or have entered into is
         global. Some, however, specify that affiliates may choose to restrict the programme
         only to certain regions.39
(72)     Therefore, the Commission considers that the geographic scope of any potential
         market for commercial affiliate programmes would be likely to be global.
         However, as the Transaction would not give rise to serious doubts under any
         plausible geographic market definition, the exact geographic delineation may be
         left open.
3.3.2.1. Conclusion
(73)     Therefore, the Commission considers that, for the purpose of this Decision, the
         geographic scope of potential markets for commercial affiliate programmes may be
         left open. The Commission will assess the impact of the Transaction at global,
         EEA-wide and national level.
4.       COMPETITIVE ASSESSMENT
4.1.     Overview of affected markets
(74)     According to the Parties, no reliable and comprehensive public source of market
         share data is available in the MSS sector. The Parties have therefore provided their
         best estimates of Priceline's and Momondo's market shares, and the shares of their
         competitors in the various potential EEA markets for "all travel" MSS and for each
39      Replies to Q1 – Questionnaire to MSS, question 25; Q2 – Questionnaire to OTAs, question 28; Q3 –
        Questionnaire to TSPs, question 22.
                                                      14
 ---pagebreak---        of the three types of travel service analysed in this Decision (namely flights, hotel
       accommodation and car rentals) on the basis of their revenues.40
(75)   Moreover, the Parties have submitted, in addition to their best estimates as to their
       own and their competitors market shares on the basis of the turnover generated,
       information on how frequently various MSS are searched for in Google's general
       search, their best estimates of the number of visitors to their own and to rival MSS
       (informing their estimates with Alexa and Comscore data) and a number of
       industry reports (such as notably reports by Skift and PhocusWright). Even though
       these data do not allow a precise estimation of the Parties' market shares, they
       confirm the presence of several competitors on the various EEA markets, and the
       fact that these competitors enjoy material brand awareness and are perceived as
       competing with the Parties.
(76)   In addition to the estimates provided by the Parties, the Commission has sought to
       gather data on the revenues generated by and the number of visitors to the Parties'
       MSS competitors, both for "all travel" MSS services and for each of flights and
       hotels MSS, at EEA level and in the affected national markets.41 While the Parties
       appear to have overestimated the market shares of some of their competitors, the
       market investigation generally confirmed the existence of alternative players in all
       the affected markets, as claimed by the Parties.
(77)   As regards their market shares on potential OTA markets, the Parties were not able
       to provide reliable data. However, as Priceline's Booking.com is one of the leading
       hotel OTAs in most EEA countries and after comparing their […] revenues with
       the total market size, as estimated in industry reports42, the Parties have assumed
       that all potential national markets for hotel OTAs and for "all travel" OTAs would
       give rise to vertically affected markets.
(78)   Table 1 below provides an overview, based on the Parties' estimates, of the
       horizontally and vertically affected markets which would arise as a result of the
       Transaction.
40   For their estimation, the Parties took into account their own MSS revenues, the main rival MSS
     operators active on the respective markets, as identified through internal market research, industry
     reports and contacts with customers, data on the number of visitors to various websites through Alexa
     and ComScore, Google Trends data on search term popularity, and elements such as the amount of
     display advertising on MSS websites, as an indication of the revenues per visitor the latter may
     generate; Form CO, Annex 4.
41   No data were gathered by the Commission in relation to car rental MSS, as the Parties' activities are
     limited and whereas Priceline operates MSS, Momondo is only active as a car rental OTA.
42   Notably, Phocuswright Online Travel Overview editions of November and December 2016, for
     Scandinavia, France, Germany, UK, Spain, Italy and Europe.
                                                      15
 ---pagebreak---  ---pagebreak--- (80)   Both Parties are active, on the one hand, in the operation of flights and hotels MSS
       in a number of countries and, on the other hand, Priceline operates OTAs.44 The
       Parties' activities would therefore give rise to a number of vertically affected
       markets, as detailed in Section 4.4 below.
(81)   Last, if distinct markets for the provision of commercial affiliate programmes were
       considered, the Transaction would not result in any horizontally affected market,
       but would give rise to vertically affected markets between the broader upstream
       market for the provision of hotels commercial affiliate programmes by MSS and
       OTAs and the downstream operation of hotels MSS.
4.2.   Sectoral overview
(82)   In 2016, the EEA MSS sector had an estimated value of around EUR [1-1.5]
       billion45 and the sector is generally growing across the EEA.46
(83)   The Parties' MSS activities in the EEA are geographically complementary: while
       Priceline's brands are stronger in Austria and Germany, Momondo's brands have a
       focus in the Nordic region.
(84)   In addition to the Parties, other MSS active in the EEA include large global
       players, such as Skyscanner, Google Flights and Google Hotels, Trivago and
       TripAdvisor, as well as a number of well-established national players such as
       Jetcost, Idealo, Liligo, Easyvoyage, Check24.at, and Flyrejser.dk.
(85)   At a global level, for "all travel" MSS, on the basis of the Parties' estimates, it
       appears that Priceline's and Momondo's market shares would be around [5-10]%
       and [0-5]% respectively. When considering narrower potential MSS markets for
       particular types of travel service, the Parties' combined global market share would
       be [10-20]% (increment [5-10]%) for flights, [0-5]% (increment less than [0-5]%)
       for hotels, and [10-20]% for car rentals (as Momondo operates as an OTA, there is
       no increment on a car rental MSS market).
(86)   On a potential EEA-wide market for "all travel" MSS, on the basis of the Parties'
       estimates it appears that their combined market share to be around [10-20]%. When
       considering narrower potential EEA-wide markets for flights MSS, hotels MSS and
       car rentals MSS, the Parties are stronger in flights MSS, achieving a combined
       market share of approximately [10-20]%. Competitors operating MSS websites in
       the EEA for various types of travel services include Google, Trivago, TripAdvisor
       and Skyscanner, as well as smaller players such as Jetcost, TravelSupermarket,
       Billiger-mietwagen, Check24 and HotelCombined.
44   Priceline also operates car rental MSS, whereas Momondo operates car rental OTAs. The Transaction
     thus gives rise to a vertical relationship in the intermediation of car rental services; however, this
     vertical relationship does not give rise to affected markets.
45   Form CO, annex 3.
46   Phocuswright described metasearch as being “among the fastest growing sectors in travel in 2013”
     and in 2015 referenced the “remarkable global rise of metasearch” – Phocuswright, Search, Shop,
     Buy: The New Digital Funnel, June 2015, p.9; Form CO, page 198 and Attachment H.
                                                         17
 ---pagebreak--- 4.3.      Horizontal effects
(87)      Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
          whether a proposed concentration would significantly impede effective competition
          in the internal market or in a substantial part of it, in particular as a result of the
          creation or strengthening of a dominant position.
(88)      In the present case, the assessment of the compatibility of the Transaction with the
          internal market will essentially focus on non-coordinated horizontal effects on
          potential MSS markets affected by the Transaction (see Table 1 above).
(89)      Non-coordinated effects may significantly impede effective competition by
          eliminating important competitive constraints on one or more firms, which
          consequently would have increased market power, without resorting to coordinated
          behaviour. The factors listed in paragraphs 27 onwards of the Horizontal Merger
          Guidelines may influence whether or not significant horizontal non-coordinated
          effects are likely to result from a merger, but not all of these factors need to be
          present to make significant non-coordinated effects likely, and the list is not
          exhaustive.47 The presence of these factors may though have an impact on the
          degree of horizontal non-coordinated effects arising from the transaction.
(90)      The Commission will first present the elements common to the assessment of the
          Transaction that cut across the different EEA countries (Section 4.3.1), before
          undertaking a more detailed analysis on a country by country basis (Section 4.3.2).
4.3.1.    Elements common to the assessment of the MSS markets in the EEA
(91)      The Commission has considered several elements, which are relevant for the
          assessment of the effects of the Transaction across the EEA countries. These
          elements include how the Parties negotiate commercial terms with customers
          (Section 4.3.1.1), closeness of competition between the Parties (Section 4.3.1.2),
          and the barriers to entry or expansion (Section 4.3.1.3).
4.3.1.1. Negotiation with customers
(92)      Respondents to the market investigation indicate that negotiations between MSS
          and OTAs and TSPs are mainly conducted bilaterally for the full inventory. MSS
          bargaining power in such negotiations may vary depending on the importance of
          the OTA or TSP.48 The main features on the basis of which MSS suppliers are
          generally selected include (i) the quality of their products, (ii) their volume of
          traffic and geographic coverage, (iii) the reputation of the MSS and (iv) the prices
          or cost/revenue-sharing arrangement proposed.49 While negotiations between large
          players appear to take place at global level, prices are negotiated at national level
          and service features, such as language, layout and sometimes content may vary
47      Commission's Guidelines on the assessment of horizontal mergers under the Council Regulation on
        the control of concentrations between undertakings (the 'Horizontal Merger Guidelines'); OJ C 31,
        5.2.2004, pp. 5-18, paragraph 26.
48      Replies to Q1 – Questionnaire to MSS, questions 27-28; Q2 – Questionnaire to OTAs, question 30;
        Q3 – Questionnaire to TSPs, questions 24.
49      Replies to Q1 – Questionnaire to MSS, question 29; Q3 – Questionnaire to TSPs, questions 25.
                                                       18
 ---pagebreak---           between EEA countries. Finally, the duration of the contract may vary from one to
          five years, with usually either party having the possibility to terminate the contract
          at short notice.50
(93)      The majority of respondents to the market investigation indicate that OTAs and
          TSPs purchase services from more than one MSS per EEA country, and that this is
          in line with their commercial policy, notably "not to limit the amount of MSS in
          each country", "to increase the traffic on their website" and "to ensure brand
          visibility which is key in the travel industry".51
(94)      As regards the bargaining power of the MSS and OTAs, while it seems to vary
          based on the relative market position of the MSS or OTA, respondents to the
          market investigation point out that it is in the interest of both MSS and OTAs to
          cooperate with, respectively, several OTAs and MSS. On the one hand, MSS have
          incentives to contract with as many OTAs as possible, in order to allow their end
          users to compare a wide range of offers for the travel products they are interested
          in. On the other hand, OTAs and TSPs also have incentives to contract with as
          many MSS as possible, to increase the visibility of their offerings and ensure that
          their prices are shown to as many potential customers as possible. In this respect,
          "while the main drivers of competition are based on traffic, price and geographic
          scope, OTAs need to work with all MSS".52
(95)      The Commission considers that it is unlikely that the Transaction would
          significantly impact the negotiating power currently held by Parties vis-à-vis their
          customers. First, the Parties' business model, which is the same as that of most
          other MSS, will remain unchanged post-Transaction. Second, the Parties' combined
          market share at global and EEA level is relatively small both for "all travel" MSS
          as well as when narrower potential MSS markets for particular types of travel
          services are considered,53 which means that the merged entity would risk losing its
          OTA and TSP customers to other MSS, if it changed its negotiating strategy. Third,
          the increment brought about the Transaction is limited,, therefore the merged entity
          will not have a materially stronger market position than Priceline or respectively
          Momondo already have today.
(96)      In light of these considerations, the Commission concludes that the proposed
          Transaction is not likely to significantly increase the Parties' negotiating power
          towards their OTA and TSP customers in EEA MSS markets.
4.3.1.2. Closeness of competition
(97)      According to the Horizontal Merger Guidelines, a merger between close
          competitors is more likely to have anticompetitive effects and lead to a significant
          increase in price. The higher the degree of substitutability between the merging
50      Replies to Q1 – Questionnaire to MSS, questions 27-28; Q2 – Questionnaire to OTAs, question 30;
        Q3 – Questionnaire to TSPs, questions 24-26.
51      Replies to Q1 – Questionnaire to MSS, question 30; Q2 – Questionnaire to OTAs, question 32.
52      Replies to Q2 – Questionnaire to OTAs, question 31.
53      As a result, the Transaction does not give rise to any affected markets at global or EEA level under
        any plausible market definition.
                                                         19
 ---pagebreak---           firms' products, the more likely it is that the merging firms will raise prices
          significantly. The purpose of assessing the closeness of competition between the
          Parties is therefore to determine whether they currently exert a significant
          competitive constraint on each other which would be removed post-Transaction,
          and whether other suppliers would be able to sufficiently constrain the Merged
          Entity.54
(98)      For the purposes of the present Transaction, it is therefore relevant to assess
          whether Piceline's and Momondo's brands are close substitutes.
(99)      The Commission notes that within the EEA, the Parties' have a different geographic
          focus and their activities are rather complementary from a geographic point of view
          and that they are not each other's main competitor in any EEA country. Kayak was
          originally stronger in the US, whereas Momondo is EEA-based, starting operating
          in Denmark and remains strongest in the Nordic countries. Therefore, still today in
          EEA countries where Momondo has a strong market position, Kayak is generally
          weak and vice versa.55 Moreover, the range of services offered by the Parties is
          somewhat different. Whereas Kayak has developed its own inventory in relation to
          all of flights, hotels and car rental services, Momondo only has its own inventory
          for flights and relies on commercial affiliate relationships for its hotels and car
          rental inventory. Therefore, Momondo, unlike Kayak, does not have established
          relationships with OTAs and TSPs in relation to hotels and car rentals.
(100)     The majority of respondents to the market investigation also indicate that the
          Parties are not close competitors, and that the activities of Priceline and Momondo
          are rather complementary.56 Conversely, when asked to identify Priceline's closest
          competitor in potential markets for "all travel" MSS and for flights MSS in the
          EEA, the majority of the respondents point to Skyscanner.57 Skyscanner is also
          identified as the closest competitor to Momondo by the majority of respondents,
          followed by Priceline, Trivago, Google, and other national players.58
(101)     In light of the above, the Commission concludes that the Parties' brands do not
          compete closely with each other in the EEA in general or in any specific EEA
          country in particular.
4.3.1.3. Barriers to entry or expansion
(102)     When entering a market is sufficiently easy, a merger is unlikely to pose any
          significant anti-competitive risk. For entry to be considered a sufficient competitive
54      Horizontal Merger Guidelines, paragraphs 28 and following.
55      From CO, page 203; Attachment D, Part 14, Priceline Group's internal document, Project Kalmar
        Overview, January 2017, section 2, slide 16, referring to complementary markets and emphasising
        that the transaction will result to brand marketing synergies assuming a "[…]". .
56      Replies to Q1 – Questionnaire to MSS, questions 33-34; Q2 – Questionnaire to OTAs, questions 36-
        37; Q3 – Questionnaire to TSPs, questions 30-31.
57      Replies to Q1 – Questionnaire to MSS, questions 33; Q2 – Questionnaire to OTAs, question 36; Q3 –
        Questionnaire to TSPs, questions 30-31.
58      Replies to Q1 – Questionnaire to MSS, question 34; Q2 – Questionnaire to OTAs, question 37; Q3 –
        Questionnaire to TSPs, questions 30-31.
                                                           20
 ---pagebreak---         constraint on the merging parties however, it must be shown to be likely, timely
        and sufficient to deter or defeat any potential anti-competitive effects of the
        merger.59 As some mergers could significantly impede competition by enabling the
        merged entity to make the expansion of smaller firms and potential competitors
        more difficult, the impact of the Transaction on the Parties' competitors' ability to
        enter or expand will be assessed.60
(103)   The Parties claim that there are no significant barriers to entry for a new MSS. The
        investment costs for entering the MSS market are limited, including creating a
        website, marketing activities to raise brand awareness, entering into contracts with
        OTAs and TSPs and obtaining the technology to compare prices. In particular, a
        MSS could easily enter into an arrangement with a commercial affiliate programme
        supplier and rely on the contracts and technology of the latter.61
(104)   A majority of respondents to the market investigation indicate that, in general,
        barriers to enter in the MSS market are not insignificant. Critical factors for success
        in the MSS market, as identified by some competitors and customers, include
        having a well-known brand, financial strength to sustain investments and an
        effective marketing strategy, since brand awareness is important for MSS to
        establish relationships and negotiate with OTAs and TSPs and to generate traffic to
        their websites.62
(105)   There are, however, examples of recent market entry in MSS markets in the EEA,
        including Google Hotels and Google Flights and Idealo. There are also examples of
        expansion by MSS that were active in one type of travel services and have
        expanded into others, such as TripAdvisor expanding its activity from the hotels
        segment to the flights segment, and KAYAK expanding from its traditionally […]
        position in flights also into hotels.63
(106)   Specifically in relation to Google, even though it is a recent entrant in the EEA,
        having launched Google Hotels in 2011 and Google Flights in 2013, it already
        appears well placed to exercise material competitive pressure on other MSS. As the
        main barrier to entry identified is brand awareness, Google is better placed to grow
        quickly as opposed to a new operator not known to the market. Moreover, several
        respondents to the market investigation point out that the main impact currently
        identifiable on MSS markets is the entry and expansion of Google Hotels and
        Google Flights rather than the Transaction.64
(107)   Similarly, respondents to the market investigation also consider that barriers to
        expansion are lower than barriers to entry, given that the technical investments
59    Horizontal Merger Guidelines, paragraph 68.
60    Horizontal Merger Guidelines, paragraph 36.
61    Form CO, pages 106 and 107.
62    Replies to Q1 – Questionnaire to MSS, questions 35-36; Q2 – Questionnaire to OTAs,
      questions 38-39.
63    Replies to Q1 – Questionnaire to MSS, question 39; Q2 – Questionnaire to OTAs, question 41.
      Form CO, page 206.
64    Illustratively, Replies to Q1 – Questionnaire to MSS, questions 12.1, 33.1, 39.1, 45.1.
                                                        21
 ---pagebreak---          appear to be much lower and suppliers will likely be able to use their existing
         customer relationships. In this respect, the market investigation also revealed that a
         number of competitors are planning expansion projects in the EEA in the coming
         years.65
(108)    Finally, the majority of the respondents to the market investigation consider that
         the Transaction will not have an impact on potential barriers to entry/expansion in
         the EEA.66
(109)    Based on the above, the Commission notes that a number of entries in the MSS
         market have occurred in the EEA over the past years. This indicates that, while
         barriers to entry and expansion in the MSS market may be material, MSS markets
         remain attractive for potential and expanding players. As a result, potential new
         entrants or MSS which are already present and may expand their service offer are
         likely to exercise a competitive constraint on the merged entity post-Transaction.
4.3.2.   Market-specific analysis of affected markets
4.3.2.1. Introduction
(110)    According to the Horizontal Merger Guidelines, "the larger the market share, the
         more likely a firm is to possess market power. And the larger the addition of
         market share, the more likely it is that a merger will lead to a significant increase
         in market power... Although market shares and additions of market shares only
         provide first indications of market power and increases in market power, they are
         normally important factors in the assessment."67
(111)    When replying to the market investigation, some competitors claim that post-
         Transaction the merged entity will have a significant market position in a number
         of EEA countries and that competition will be reduced.
(112)    The Commission considers that Transaction will not give rise to competition
         concerns, for the following reasons.
(113)    First, the Parties are small players in the travel MSS market across Europe and,
         although in some national markets the Parties' combined market share is significant
         (that is in Austria and Denmark), the increment brought about the Transaction is
         limited, both at EEA and at national level, even when considering a possible
         narrower segmentation of MSS markets by type of travel service.
(114)    Second, the Parties' activities are geographically complementary: at national level,
         in EEA countries in which Momondo's brands have a stronger position (that is in
         the Nordic region), Priceline is much weaker, with a market share estimated as no
         more than [0-5]%. Conversely, in EEA countries where Priceline's brands have a
         stronger position (such as Austria and Germany), Momondo's brands are much
         weaker, with a market share of approximately [5-10]% or less.
65      Replies to Q1 – Questionnaire to MSS, question 38; Q2 – Questionnaire to OTAs, question 39.
66      Replies to Q1 – Questionnaire to MSS, question 37; Q2 – Questionnaire to OTAs, question 40.
67      Horizontal Merger Guidelines, paragraph 27.
                                                       22
 ---pagebreak--- (115)     Third, as also shown by the market investigation, the Parties will continue to be
          constrained by a number of major MSS that are active globally and in the affected
          markets, such as Skyscanner, Google with its specialised search MSS Google
          Flights and Google Hotels, Trivago and TripAdvisor, as well as a number of well-
          established national players such as Jetcost, Idealo, Liligo and Easyvoyage. Google
          has become a major competitor to existing travel MSS in recent years. Google has
          already become the market leader in the US, where its two MSS brands were
          launched in 2011, and a comparable strengthening of its market position is likely to
          materialise also in Europe. As also noted by an industry report, Google is on the
          cusp of being one of the globe’s most important metasearch companies.68
(116)     Finally, the majority of respondents to the market investigation, including MSS,
          OTAs and TSPs, did not raise any competition concerns with respect to the Parties'
          position in the EEA or at national level.69
4.3.2.2. Austria – markets for "all travel" MSS and MSS for flights
          Parties' activities
(117)     On the basis of the Parties' estimates, it appears that Priceline's and Momondo's
          combined market share would be moderate for "all travel" MSS in Austria,
          amounting to around [30-40]%, with an increment of [0-5]%.
(118)     On a narrower potential market for flights MSS, the Parties' combined market share
          amounts to [60-70]%. However, the increment is marginal and amounts to [0-5]%.
          Commission's assessment
(119)     Even though the market for "all travel" MSS and the narrower potential market for
          flights MSS in Austria would be affected, the increment brought about by the
          Transaction would be limited, as Momondo generated EUR […] of turnover in
          Austria in 2016, EUR […] of which through its flights MSS.70 Therefore, there
          would be no material Transaction-specific effect in Austrian MSS markets.
(120)     Multiple competitors remain in the "all travel" MSS market in Austria, such as
          Trivago, TripAdvisor, Google, and Skyscanner. In addition, the merged entity will
          continue to face competition from a number of smaller MSS, including Check24.at,
          Billiger-mietwagen, Idealo.at and Jetcost.
(121)     Several competitors will also continue to significantly compete in flights MSS in
          Austria, such as Skyscanner, with a market share materially higher than that of
          Momondo. TripAdvisor, Idealo, and Jetcost are also active on the Austrian market
          for flights MSS, with market shares comparable to that of Momondo. Moreover,
68      Notably, Skift, Google Hotel Ads Is Becoming the Behemoth Everyone Feared of 24 April 2017,
        accessible at: https://skift.com/2017/04/24/google-hotel-ads-is-becoming-the-behemoth-everyone-
        feared/
69      Replies to Q1 – Questionnaire to MSS, questions 45-50; Q2 – Questionnaire to OTAs,
        questions 47-53; Q3 – Questionnaire to TSPs, questions 34-40.
70      The Parties estimate the size of the total MSS market in Austria at EUR [20-30] million and of the
        flights MSS market at EUR [5-10] million. KAYAK's turnover in Austria amounts to EUR […]
        million for all MSS and EUR […] million for flights.
                                                         23
 ---pagebreak---         Google Flights entered the Austrian market in 2015 and is expected to further
        strengthen its market position, especially in light of consumer awareness of the
        Google brand.
(122)   The existence of additional competitors as well as the marginal presence of
        Momondo for flights MSS in Austria is also confirmed by Google Trend data. In
        particular, Checkfelix (a KAYAK brand) is the most searched for MSS in Austria,
        consistent with its market position, followed by Skyscanner, which has been
        steadily growing in popularity over the past five years, and has overtaken Swoodoo
        (a KAYAK brand) which has been declining in popularity over time. Searches for
        Google Flights have also started to grow rapidly since the beginning of 2015 and
        have overtaken all the remaining MSS.71
(123)   Similarly, when looking at the frequency with which different MSS appear in the
        first page of the search results generated on Google in Austria in response to
        popular flight-related searches, KAYAK's brand Checkfelix is second in terms of
        average ranking, just behind Google Flights, appearing on the first page of the
        results in 90% of the searches and in the top three results in 85% of the searches.
        The OTA Opodo and the TSP Swiss have higher ranking than any MSS in flights
        related searches. Skyscanner appears on the first page in 90% of searches and in the
        top three results 15% of the time. Momondo does not appear in the top three results
        at all and appears on the first page in just 10% of searches.72
(124)   As regards barriers to entry, the analysis in Section 4.3.1.3. above is also applicable
        in Austria. While barriers to entry may not be insignificant, the MSS market in
        Austria remains attractive for potential players that can use a brand known in other
        sectors/activities as demonstrated by the recent entry of Google Flights and
        TripAdvisor. Respondents to the market investigation also confirmed that the
        expansion of an already active MSS supplier would be easier as "the technical
        investment is much lower" and "an existing MSS would have a certain advantage in
        that their brand may be known to end users". In this respect, a number of
        competitors confirmed their interntion to enter or expand in a number of EEA
        countries and that their plans would not change because of the merger.73
(125)   Finally, the majority of respondents to the market investigation considers that the
        Transaction will not have a negative impact on the "all travel" MSS market in
        Austria or on the flights MSS segment in Austria.74
71    Form CO, page 113 and 114. In relation to Google Flights, the Parties specify that reference is made
      to actual searches of the term "Google Flights"; so any other search generating results on Google
      Flights is not taken into account in this ranking, likely understating the significance of Google Flights.
72    Form CO, Table 6.30, page 116.
73    Replies to Q1 – Questionnaire to MSS, questions 36 and 36.1 and 38.
74    Replies to Q1 – Questionnaire to MSS, questions 45-50; Q2 – Questionnaire to OTAs,
      questions 47-53; Q3 – Questionnaire to TSPs, questions 34-40.
                                                          24
 ---pagebreak---           Conclusion
(126)     The Commission thus concludes that the Transaction does not raise serious doubts
          as to its compatibility with the internal market in respect of the market for MSS in
          Austria, under any plausible segmentation.
4.3.2.3. Denmark – markets for "all travel" MSS, MSS for flights and MSS for hotels
          Parties' activities
(127)     On the basis of the Parties' estimates, it appears that Priceline's and Momondo's
          combined market share would amount to [50-60]% for "all travel" MSS in
          Denmark, with an increment of less than [0-5]%.
(128)     On a narrower potential market for flights MSS, the Parties' combined market
          shares is estimated at [60-70]%. However, the increment is marginal and amounts
          to less than [0-5]%.
(129)     On a narrower potential market for hotels MSS, the Parties' combined market
          shares is estimated at [20-30]%, with an increment of less than [0-5]%.
          Commission's assessment
(130)     The increment brought upon by the Transaction for "all travel" MSS, flights MSS
          and hotels MSS would be very limited, as KAYAK generated approximately
          EUR […] across all travel in Denmark in 2016, of which EUR […] in flights.75
          Therefore, there would be no material Transaction-specific effect in these markets.
(131)     Multiple competitors continue to significantly compete in the market for "all
          travel" MSS, such as Google, which recently entered (in 2014) and is expected to
          quickly strengthen its market position, Travelmarket, TripAdvisor, Skyscanner,
          Trivago and Flyrejser. The Parties submit that all of these MSS rivals have a
          market share greater than that of KAYAK in Denmark.
(132)     Several competitors will also continue to significantly compete in flights MSS,
          such as Skyscanner, Flyrejser, Jetcost, Google Flights, TripAdvisor and
          Travelmarket.
(133)     As regards hotels MSS, other important MSS that will continue to significantly
          compete post-Transaction are Trivago, TripAdvisor, Travelmarket, Skyscanner and
          Google Hotels.
(134)     The existence of active competitors as well as the marginal presence of Kayak for
          flights MSS in Denmark is also confirmed by Google Trend data. While Momondo
          has consistently been the most searched for MSS on Google in Denmark in the last
          five years, consistent with its market position, TripAdvisor and Skyscanner are the
          second and third most searched-for MSS in Denmark, and their popularity has
          remained broadly the same over the last five years. Searches for Flyrejser have
75      The Parties estimate the size of the total MSS market in Denmark at EUR [20-30] million and of the
        flights MSS market at EUR [10-20] million. Momondo generates a turnover of EUR […] million in
        Denmark through "all travel" MSS and of EUR […] million through flights MSS.
                                                        25
 ---pagebreak---          decreased during this period, although it still remains number four overall. Very
         few consumers search for KAYAK, and it is by far the least popular MSS in terms
         of consumer searches in Denmark.76
(135)    Similarly, the Parties estimate on the basis of Alexa data how traffic to flights
         MSS, namely number of unique visitors, is distributed among the various providers
         in Denmark. While Momondo receives [30-40]% of the overall traffic, Google
         Flights (as estimated by the Parties) and TripAdvisor also receive a significant
         proportion of the overall traffic, namely [20-30]% and [10-20]% respectively,
         followed by Travelmarket and Skyscanner receiving [5-10]% and [5-10]% of the
         overall traffic respectively. KAYAK by contrast receives only a [0-5]% of the
         overall traffic.77
(136)    As regards barriers to entry, the analysis in Section 4.3.1.3. above is also applicable
         to Denmark. While barriers to entry may not be insignificant, the MSS market in
         Denmark remains attractive for potential players, as demonstrated by the recent
         entry of for example for Google (in 2013) and Idealo (in 2014). A number of
         competitors also confirmed their intention to enter or expand in a number of EEA
         countries, including the Nordic countries and that their plans would not change
         because of the merger.78
(137)    Finally, the majority of respondents to the market investigation considers that the
         Transaction will not have a negative impact on the market for "all travel" MSS or
         the flights MSS or hotels MSS segments in Denmark.79
         Conclusion
(138)    The Commission thus concludes that the Transaction does not raise serious doubts
         as to its compatibility with the internal market in respect of the market for MSS in
         Denmark, under any plausible segmentation.
4.3.2.4. Germany - MSS for flights
         Parties' activities
(139)    On the basis of the Parties' estimates, it appears that Priceline's and Momondo's
         combined market share would be [20-30]% for flights MSS in Germany, with an
         increment of [5-10]%.
         Commission's assessment
(140)    The increment brought about by the Transaction on the German market for flights
         MSS is not significant, around [5-10]%, and the Parties' combined market share is
         well below [30-40]%, so that there would be no material Transaction-specific
         effect in this market.
76      Form CO, page 121.
77      Form CO, page 122 and 123.
78      Replies to Q1 – Questionnaire to MSS, questions 36 and 36.1 and 39.1.
79      Replies to Q1 – Questionnaire to MSS, questions 45-50; Q2 – Questionnaire to OTAs,
        questions 47-53; Q3 – Questionnaire to TSPs, questions 34-40.
                                                       26
 ---pagebreak--- (141)    Additional competitors are active and will remain present in the flights MSS
         market, such as Skyscanner, Google Flights, and Idealo. A number of smaller MSS
         are also present such as TripAdvisor and Liligo.
(142)    Finally, the majority of respondents to the market investigation considers that the
         Transaction will not have a negative impact with respect to flights MSS in
         Germany.80
         Conclusion
(143)    The Commission thus concludes that the Transaction does not raise serious doubts
         as to its compatibility with the internal market in respect of the market for flights
         MSS in Germany.
4.3.2.5. Portugal – MSS for flights
         Parties' activities
(144)    On the basis of the Parties' estimates, Priceline's and Momondo's combined market
         share would be [20-30]% on a market for flights MSS in Portugal, with an
         increment of [0-5]%.
         Commission's assessment
(145)    The increment brought upon by the Transaction for flights MSS is only [0-5]% and
         the Parties' combined market share is well below [30-40]%, so that there would be
         no material Transaction-specific effect in this market.
(146)    Additional competitors are and will remain active in flights MSS in Portugal, such
         as Google Flights, Skyscanner, Jetcost, and TripAdvisor.
(147)    Finally, the majority of respondents to the market investigation considers that the
         Transaction will not have a negative impact on the market for flights MSS in
         Portugal.81
         Conclusion
(148)    The Commission thus concludes that the Transaction does not raise serious doubts
         as to its compatibility with the internal market in respect of the market for flights
         MSS in Portugal.
4.3.2.6. Sweden – "all travel" MSS, MSS for flights and MSS for hotels
         Parties' activities
(149)    On the basis of the Parties' best estimates, Priceline and Momondo's combined
         market share would be [20-30]% for "all travel" MSS in Sweden, with an
         increment of [0-5]%.
80      Replies to Q1 – Questionnaire to MSS, questions 45-50; Q2 – Questionnaire to OTAs,
        questions 47-53; Q3 – Questionnaire to TSPs, questions 34-40.
81      Replies to Q1 – Questionnaire to MSS, questions 45-50; Q2 – Questionnaire to OTAs,
        questions 47-53; Q3 – Questionnaire to TSPs, questions 34-40.
                                                       27
 ---pagebreak--- (150)  On a narrower potential market for flights MSS, the Parties estimate their
       combined market share as [20-30]%, with an increment of less than [0-5]%.
(151)  On a narrower potential market for hotels MSS, the Parties estimate their combined
       market share as [20-30]%, with an increment of less than [0-5]%.
       Commission's assessment
(152)  The increment brought upon by the Transaction is very small (around [0-5]%) and
       the Parties' combined market share also remains below [30-40]% under all
       plausible market definitions, so that there would be no material Transaction-
       specific effect in these markets.
(153)  Additional competitors are and will remain active in a market for "all travel" MSS,
       as well as in the potential narrower MSS markets for flights and hotels, such as
       Google, TripAdvisor, Skyscanner, Trivago, Roseguiden and Destination.
(154)  Finally, the majority of respondents to the market investigation considers that the
       Transaction will not have a negative impact the market for "all travel" MSS, flights
       MSS or hotels MSS in Sweden.
       Conclusion
(155)  The Commission thus concludes that the Transaction does not raise serious doubts
       as to its compatibility with the internal market in respect of the market for MSS in
       Sweden, under any plausible segmentation.
4.3.3. Conclusion
(156)  In view of the above, the Commission considers that the Transaction does not raise
       any serious doubts as regards its compatibility with the internal market, as regards
       the Parties' horizontal overlaps.
4.4.   Vertical effects
(157)  As indicated in Section 4.1 above, the Transaction gives rise to two types of
       vertical relationships between the Parties, namely: (i) between the Parties' MSS
       activities upstream and OTA activities downstream and (ii) between the provision
       of commercial affiliate programmes by the Parties' MSS and OTAs upstream and
       the operation of flights and hotels MSS downstream.
4.4.1. Vertical link between MSS upstream and OTAs downstream
(158)  Both Parties are active in the operation of MSS in a number of EEA countries and
       operate MSS offering different types of travel services, namely flights, hotels and,
       for Priceline only, also car rentals.
(159)  Priceline is already vertically integrated, as it also operates OTAs. In the EEA, it is
       active through its hotels OTA, Booking.com, which has a material market position
       in all EEA countries and with its car rental OTA, Rentalcars.com. In flights OTA,
       Priceline has a very limited activity through its OTA Priceline.com. Priceline.com
       is heavily focused on US markets and is almost unknown in the EEA. Momondo is
       only active in car rental OTAs.
                                                 28
 ---pagebreak--- (160) To the extent that OTAs purchase lead generation services from MSS, paying MSS
      a commission or fee to be listed on the MSS website together with other competing
      offers, there exists a vertical relationship between MSS upstream and OTAs
      downstream.
(161) In light of the various possible delineations of the relevant markets, as set out in
      Section 3, the Parties' activities would give rise to a number of potential vertically
      affected markets, as detailed below:
          a. The Parties estimate that their combined market share on a flights MSS
              market would exceed 30% in Austria and Denmark (namely [60-70]% in
              Austria and [60-70]% in Denmark); therefore, vertically affected markets
              would arise between the operation of flights MSS by the Parties and the
              operation of flights OTAs by Priceline in Austria and Denmark, where
              Priceline's estimated market shares are below 1%. The only flights OTA
              operated by the Parties is Priceline.com, the content of which is not
              available in any language other than English, […].
              If OTA product markets were considered broader in scope, comprising "all
              travel" OTAs, the Parties estimate their combined market share as
              exceeding [20-30]%, mainly as a result of the presence of Priceline's
              Booking.com. Therefore, vertically affected markets would exist between
              the operation of flights MSS by the Parties and the operation of OTAs in
              the EEA and in all EEA countries, in which Momondo is active, namely in
              Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany,
              Ireland, Italy, Netherlands, Norway, Poland, Portugal, Romania, Spain,
              Sweden and the UK.
          b. The Parties estimate that on markets for "all travel" MSS, their combined
              market share would exceed 30% in Austria and Denmark (namely [30-40]%
              in Austria and [50-60]% in Denmark); therefore vertically affected markets
              would exist between the operation of MSS by the Parties and (i) the
              operation of flights OTAs by Priceline in Austria and Denmark (with the
              market shares of Priceline.com being estimated at less than 1%); (ii) the
              operation of hotels OTAs by Priceline in the EEA and in all EEA countries,
              in which Momondo is active (where Priceline estimates that its market
              share would exceed [20-30]%, mainly through the activities of
              Booking.com) and (iii) the operation of car rental OTAs by the Parties in
              Austria and Denmark, where the Parties estimate their market shares as
              lower than [20-30]%.
              If OTA product markets were considered broader in scope, comprising "all
              travel" OTAs, vertically affected markets would exist between the operation
              of MSS by the Parties and the operation of OTAs in the EEA and in all
              EEA countries, in which Momondo is active, since the Parties estimate their
              combined market share as exceeding [20-30]%, mainly through the
              activities of Booking.com.
          c. The Parties estimate that on markets for hotels OTAs, Priceline's market
              share would exceed [20-30]% in the EEA and in all EEA countries, mainly
              through the activities of Booking.com. Therefore, vertically affected
              markets would exist between the operation of hotels MSS by the Parties
                                               29
 ---pagebreak---                   (where the Parties estimate their combined market shares as below 30% in
                  the the EEA all EEA countries, in which both Parties are active) and
                  Priceline's hotels OTA activities, at EEA level and in all EEA countries in
                  which Momondo is active.
                  If MSS product markets were considered broader in scope, comprising "all
                  travel" MSS, vertically affected markets would exist between the operation
                  of "all travel" MSS by the Parties (where the Parties' market shares are
                  estimated at [30-40]% in Austria and [50-60]% in Denmark) and Priceline's
                  hotels OTA activities at EEA level and in all EEA countries in which
                  Momondo is active.
             d. The Parties estimate that on markets for "all travel" OTAs, Priceline's
                  market share would exceed [20-30]% in the EEA and in all EEA countries,
                  mainly through the presence of Booking.com. Therefore, vertically affected
                  markets would exist between, on the one hand, the operation of flights MSS
                  and hotels MSS by the Parties and the operation of car rental MSS by
                  Priceline and, on the other hand, Priceline's "all travel" OTA activities at
                  EEA level and in all EEA countries in which Momondo is active.
                  If MSS product markets were considered broader in scope, comprising "all
                  travel" MSS, vertically affected markets would exist between the operation
                  of "all travel" MSS by the Parties and Priceline's "all travel" OTA activities,
                  at EEA level and in all EEA countries in which Momondo is active.
(162)    In assessing these vertical relationships, it is appropriate to consider whether the
         Parties could pursue a strategy of input foreclosure, whereby they would delist
         from their MSS OTAs which compete with them on potential downstream OTA
         markets. It is also appropriate to consider whether the Parties could pursue a
         strategy of customer foreclosure, whereby they would withdraw their OTAs from
         rival MSS upstream and list their OTAs only on the Parties' own MSS.
4.4.1.1. Input foreclosure
(163)    According to the Non-horizontal Merger Guidelines, in order to assess the
         likelihood of the merged entity following an input foreclosure strategy, the merged
         entity should have the ability and the incentive to adopt such strategy. Moreover,
         for an input foreclosure strategy to be anti-competitive and raise serious doubts as
         to the compatibility of the Transaction with the internal market, such strategy
         would have to produce anti-competitive results.82
(164)    For the merged entity to be able to adopt an input foreclosure strategy, it would
         need to have a significant degree of market power on the upstream MSS market
         that would allow it to restrict access to or raise the cost of its lead generation
         services to rival OTAs.83 Therefore, such strategy could only be followed in
82      Commission Notice, Guidelines on the assessment of non-horizontal mergers under the Council
        Regulation on the control of concentrations between undertakings ("Non-horizontal Merger
        Guidelines") OJ 2008/C 265/07, para.32.
83      Non-horizontal Merger Guidelines, para.35.
                                                   30
 ---pagebreak---        Austria and Denmark, where the Parties' flights MSS and "all travel" MSS have a
       material market position.
(165)  Downstream, the markets that are primarily vertically related are the markets for
       flights OTAs. Depending on the market definition considered, the number of
       affected markets is greater, as seen in the Table in para. 77 above, as broader
       markets comprising "all travel" OTAs would also be vertically related. Similarly, if
       broader markets for "all travel" MSS in Austria and Denmark are considered,
       markets for hotels OTAs, car rental OTAs and "all travel" OTAs would also be
       vertically affected. However, any foreclosure of lead generation services would
       originate from flights MSS, since this is the market segment in which the merged
       entity would have a strong market position and potentially exert some market
       power. Consequently, even on a broader market for "all travel" OTAs, what would
       be impacted by such input foreclosure strategy would be the traffic directed to
       flights OTAs. Therefore, the input foreclosure analysis will mainly focus on the
       relationships between flights MSS and flights OTAs.
(166)  When asked on whether the merged entity would have the ability to restrict OTAs'
       access to MSS lead generation services or increase the cost of such services,
       respondents to the market investigation were rather divided. Whereas some
       respondents do not exclude that the merged entity will have the ability to display its
       own OTAs in a more favourable way, other respondents point out that there will be
       sufficient competition to prevent the merged entity from increasing the cost of
       advertising and that in a business where transparency to consumers is key, this type
       of foreclosure will not occur.84
(167)  The Parties compete with a number of other MSS operators in Austria and
       Denmark, such as Skyscanner - which has a market position stronger than,
       respectively, Momondo and Priceline, Google Flights - a recent entrant with
       significant growth potential, TripAdvisor and others. OTAs in Austria and
       Denmark would thus still have the possibility to still advertise their services on
       other MSS and would not be fully reliant on the Parties. Already today, OTAs
       purchase lead generation services from multiple MSS; the majority of respondents
       to the market investigation indicating that OTAs (as well as TSPs) purchase
       services from more than three MSS per EEA country, in order to increase traffic to
       their websites and reach as many consumers as possible.85
(168)  Moreover, MSS are not the only source of traffic for OTAs. Consumers may also
       reach OTA websites through direct visits, to the extent that the OTA is known to
       them, by following advertisments on blogs, travel websites, etc., through general
       search e.g. on Google or Bing, or through other sources, such as e-mail marketing,
       marketing on social media, etc. OTAs responding to the market investigation
       estimate that approximately half of their traffic comes through MSS referrals,
       whereas the other half is split among the other channels.86
84    Replies to Q1 – Questionnaire to MSS, questions 42.1 and 42.2; Q2 – Questionnaire to OTAs,
      questions 44.1 and 44.2; Q3 – Questionnaire to TSPs, questions 33.1 and 33.2.
85    Replies to Q1 – Questionnaire to MSS, question 30; Q2 – Questionnaire to OTAs, question 32; Q3 –
      Questionnaire to TSPs, question 26.
86    Replies to Q2 – Questionnaire to OTAs, question 3.
                                                      31
 ---pagebreak--- (169)  In relation to Austria, even if the Parties have a material market position in flights
       MSS markets, the increment of the Transaction is rather limited, amounting,
       according to the Parties' estimation, to market shares of [0-5]%. Therefore, the
       merged entity's market position, and consequently also its ability to follow an input
       foreclosure strategy, will not be materially increased relative to that of Priceline
       already today in the Austrian market. Priceline currently has a market share of
       [60-70]% on flights MSS in Austria and is vertically integrated, also operating
       flights OTAs; yet there is no evidence of Priceline attempting to restrict or increase
       the cost of rival OTAs' access to its MSS lead generation services.
(170)  The situation is different in Denmark, where the market share of the already
       integrated Priceline on MSS markets is very limited, estimated as approximately
       [0-5]%, and Momondo is the market leader on flights MSS, with a market share
       estimated at [60-70]%. Therefore, post-Transaction, the position of the merged
       entity on the upstream and downstream markets will be comparable to the current
       position of Priceline on the upstream and downstream markets in Austria.
(171)  In light of the above, it cannot be excluded that the merged entity would have the
       ability to follow a input foreclosure strategy. However, it appears unlikely that the
       merged entity would have the incentive to do so.
(172)  Respondents to the market investigation are rather split as to whether they consider
       that the merged entity would have the incentive to adopt an input foreclosure
       strategy, some mentioning that some change in the display of search results on the
       Parties' MSS may occur, whereas others point out that any such incentives would
       exist already, that MSS markets are competitive and that a foreclosure strategy
       could restrict the attractiveness of the Parties' MSS.87
(173)  The Commission however considers unlikely that the merged entity would have
       incentives to foreclose its input, as it appears unlikely that such strategy would be
       profitable to it.
(174)  On the downstream market for flights OTAs, the Parties have a marginal presence
       in the EEA through Priceline.com. Priceline.com is focused in the US, is not
       available in German, Danish or any EEA language other than English and […].
       Priceline.com generated less than EUR […] million in 2016 in the EEA,
       corresponding to less than […]% of its total revenues. In Austria, it generated
       EUR […] and in Denmark EUR […] in the same period.
(175)  On the upstream market for flights MSS, the Parties rely primarily on OTAs for
       their revenues: OTAs account for at least […]% of KAYAK's flights MSS
       revenues in the EEA and for […]% of Momondo's flights MSS revenues. By
       relying exclusively on TSPs and on Priceline's flights OTAs, the activities of which
       are marginal in the EEA, the Parties' MSS would thus in all likelihood incur losses.
       Similarly, by raising prices that would risk reducing the attractiveness of its MSS
       to OTAs and incentivising the latter to switch to other suppliers, the merged entity
       would forgo a material part of its revenues.
87    Replies to Q1 – Questionnaire to MSS, questions 42.3 and 42.4; Q2 – Questionnaire to OTAs,
      questions 44.3 and 44.4; Q3 – Questionnaire to TSPs, questions 33.3 and 33.4.
                                                      32
 ---pagebreak--- (176)    It is therefore unlikely that the Parties would risk their flights MSS revenues,
         amounting to EUR […] million in Austria and EUR […] million in Denmark, to
         favour Priceline.com, which generates only a fraction of those revenues in
         the EEA.
(177)    Moreover, the Parties point out that MSS base their reputation on the provision of a
         comprehensive and neutral price comparison of OTA and TSPs offers. MSS would
         therefore be unlikely to follow a strategy of limiting the number of OTAs or TSPs
         listed on their websites, in order to prioritise OTAs belonging to their own group,
         as this would go against the business model under which MSS operate and could
         lead to the loss of consumers' confidence, driving consumers to rival MSS with
         more comprehensive offers. Respondents to the market investigation gave mixed
         responses as to whether they consider that MSS present search results in an
         objective and neutral way, some claiming that there is no transparency as to how
         results are displayed and that results are also displayed, according to the
         commission agreed with the MSS. Other respondents, however, point out that
         "flights are […] ordered by price, flight time, route or convenience" and that they
         consider that results are presented in a "fair and unbiased way". 88
(178)    The Parties also submit that such foreclosure strategy could lead to retaliation from
         other integrated MSS. If the Parties were to exclude e.g. Expedia flight offers from
         their MSS, Expedia could react by restricting access by the the Parties' hotels
         OTAs to Expedia's MSS, Trivago. Last, in addition to Priceline itself, which is
         already active on the upstream MSS and downstream OTA markets, several other
         competitors with a material presence in EEA markets are similarly vertically
         integrated, including the major OTAs Expedia with its hotels MSS Trivago,
         eDreams Odigeo with its flights MSS Liligo, and Lastminute.com, with its MSS
         Jetcost. In 2016, the OTA Ctrip acquired Skyscanner, the Parties' main competitor
         in flights MSS in the EEA. Yet, these acquisitions do not appear to have led to any
         foreclosure, as the MSS belonging to these groups continue to list several OTAs, in
         addition to those belonging to the respective group.
(179)    Therefore, on balance, the Commission considers that the merged entity would be
         unlikely to have the incentive to engage in an input foreclosure strategy.
         Consequently, the Commission concludes that the Transaction is not likely to lead
         to the adoption of an input foreclosure strategy by the Merged Entity.
4.4.1.2. Customer foreclosure
(180)    Similarly, according to the Non-horizontal Merger Guidelines, for anti-competitive
         customer foreclosure to occur following the Transaction, the merged entity should
         have the ability and the incentive to adopt such strategy, which in turn would have
         to result in anti-competitive effects.89
(181)    For the merged entity to be able to adopt a customer foreclosure strategy, it must
         have a significant degree of market power on the downstream market, as otherwise
88      Replies to Q1 – Questionnaire to MSS, questions 42.3 and 42.4; Q2 – Questionnaire to OTAs,
        questions 35, 44.3 and 44.4; Q3 – Questionnaire to TSPs, questions 28, 33.3 and 33.4; Form CO,
        page 155.
89      Non-horizontal Merger Guidelines, para.59.
                                                     33
 ---pagebreak---        it would not constitute an important customer for rival MSS, since the latter would
       have access to a broad customer base.90 Therefore, such a strategy could only be
       followed in relation to the Parties' activities in hotels OTAs, where Priceline has a
       material position or on potential markets for "all travel" OTAs, which include hotel
       OTA activities. The Parties do not have reliable estimates of their market position
       on hotels or "all travel" OTA markets; they estimate however that this could be
       material in the EEA as a whole and in all EEA countries. The likelihood of
       customer foreclosure would thus have to be assessed at EEA level and in Austria,
       Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy,
       Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden and the UK,
       where Momondo is also active.
(182)  Upstream, the markets which are primarily affected are the markets for hotels
       MSS. Depending on the market definition considered, the number of affected
       markets is greater, as seen in the Table in para.77 above, as broader markets
       comprising "all travel" MSS would also be vertically linked to the market for hotels
       OTAs. Similarly, if broader markets for "all travel" OTAs are considered, markets
       for flights MSSs, car rental MSS and "all travel" MSS would also be vertically
       affected. As, however, any strategy of customer foreclosure (withdrawal of hotels
       OTAs from rival MSS) would only impact the supply of lead generation services
       by hotels MSS, the customer foreclosure analysis will focus on the relationships
       between hotels MSS and hotels OTAs.
(183)  The Transaction is, however unlikely to result in customer foreclosure, for the
       following reasons.
(184)  Respondents to the market investigation are split on whether the merged entity
       would have the ability to restrict MSS access to OTA customers, with a slight
       majority considering that this would be the case, as the merged entity would have a
       dominant position. Other respondents, however, indicate that exclusivity contracts
       are very rare in the industry and unlikely to be imposed by the merged entity.91
(185)  However, Priceline is constrained in hotels and "all travel" OTA markets by a
       number of other OTAs, among which Expedia, Opodo, and Lastminute.com, all
       with material market positions in the EEA, as well as smaller players and new
       entrants, which are expanding their activities across the EEA, such as Amoma.
       Moreover, in addition to providing services to OTAs, MSS also enter into direct
       relationships with TSPs and list directly hotels' and other travel providers'
       offerings.
(186)  Moreover, in several of the vertically affected markets, the Transaction does not
       bring about a material increment (estimated by the Parties as never exceeding
       [5-10]%). Therefore, in those markets, the ability of the merged entity to pursue a
       customer foreclosure strategy will not materially change post-Transaction, as
       compared to Priceline's existing ability to attempt customer foreclosure. The
       situation is different in those markets in which Momondo has a material presence
       in hotels MSS, namely Denmark (estimated at [20-30]%), Finland (estimated
90    Non-horizontal Merger Guidelines, para.61.
91    Replies to Q1 – Questionnaire to MSS, questions 43.1 and 43.2; Q2 – Questionnaire to OTAs,
      questions 45.1 and 45.2.
                                                  34
 ---pagebreak---         at [10-20]%), Norway (estimated at [10-20]%), Romania (estimated at [10-20]%)
        and Sweden (estimated at [20-30]%).
(187)   In light of the above, it cannot be excluded that the merged entity would have the
        ability to follow a customer foreclosure strategy. However, it appears unlikely that
        the merged entity would have the incentive to do so.
(188)   Whereas respondents to the market investigation are rather split as to whether the
        merged entity would have the incentive to engage in such a customer foreclosure
        strategy, with a slight majority considering that this would not be the case, 92 it
        appears unlikely that such a strategy would be profitable for the merged entity.
(189)   First, such customer foreclosure strategy would be contrary to OTAs' business
        model. As noted by the Parties and respondents to the market investigation,93
        OTAs strive to increase the visibility of their offers, in order to attract as many
        users as possible to their platforms. Therefore, OTAs would be unlikely to follow a
        strategy that would result in them only listing their offers on in-house MSS, since
        this would limit their opportunities to attract additional traffic. Specifically, […]%
        of Booking.com's 2016 spend on MSS went to rival MSS, […]% going to
        Expedia's hotel MSS, Trivago.94
(190)   Second, Priceline's OTA Booking.com generates much more revenue than the
        merged entity's MSS, exceeding at EEA level the revenues generated by the
        Parties' MSS by nearly […]. Moreover, Booking.com is more profitable than the
        Parties' MSS;95 the merged entity would thus be unlikely to risk foregoing the
        revenues of Booking.com in an attempt to somewhat increase its MSS revenues.
(191)   Third, previous examples of vertical integration in the industry, such as notably the
        acquisition of Trivago by Expedia, of Skyscanner by C-trip and of Liligo by
        eDreams have not resulted in customer foreclosure. OTAs belonging to these
        groups continue to list their offerings on multiple MSS. Moreover, any such
        strategy could incite retaliation from other integrated MSS, which could in turn
        also restrict their OTAs from listing their offerings on the Parties' MSS.
(192)   In light of the above considerations, the Commission considers that on balance, the
        merged entity would be unlikely to adopt a customer foreclosure strategy following
        the Transaction.
92    Replies to Q1 – Questionnaire to MSS, questions 43.3 and 43.4; Q2 – Questionnaire to OTAs,
      questions 45.3 and 45.4.
93    Replies to Q1 – Questionnaire to MSS, questions 43.3 and 43.4; Q2 – Questionnaire to OTAs,
      questions 45.3 and 45.4; Form CO, page 165.
94    Form CO, Table 6.67.
95    The EBIDTA of Booking.com was [40-50]% in 2016, whereas KAYAK had an EBIDTA of […]%
      and Momondo of […]%.
                                                  35
 ---pagebreak--- 4.4.2.   Vertical link between the Parties' provision of hotels commercial affiliate
         programmes by MSS and OTAs upstream and the operation of hotels MSS
         downstream
(193)    If separate markets for commercial affiliate programmes are considered, the
         Transaction would only give rise to vertically affected markets between, on the one
         hand, the upstream provision of commercial affiliate programmes for hotels by
         MSS and OTAs and, on the other hand, the downstream operation of hotels MSS
         and hotels OTAs. The Parties estimate that their combined market shares would
         exceed [20-30]% both upstream and downstream in the EEA and all EEA
         countries, in which Momondo is active.96 Booking.com offers a hotels OTA
         commercial affiliate programme on the upstream markets, where the Parties
         estimate that its market share would exceed [20-30]% and is active as an OTA on
         downstream markets, where its market share is again estimated as
         exceeding [20-30]%.97
(194)    Therefore, it needs to be assessed whether the Transaction would be likely to result
         in any form of input or customer foreclosure.
(195)    As Momondo does not provide any hotel commercial affiliate programmes through
         its MSS or OTAs, Priceline's ability and incentive to follow any input foreclosure
         strategy will not be influenced by the Transaction. Moreover, a number of other
         providers will continue to supply hotel commercial affiliate programmes, including
         both MSS like HotelsCombined, TripAdvisor and Trivago and OTAs, like
         eDreams, Lastminute.com and Opodo.
(196)    Regarding any potential customer foreclosure, while Momondo does not offer
         commercial affiliate services for hotels, it is a customer of such services supplied
         by HotelsCombined. […]. Moreover, any risk of customer foreclosure can also be
         excluded, since the potential customer base for those services is very broad,
         including not only MSS and OTAs but also TSPs, travel blogs and other websites.
         Therefore, removing a small customer like Momondo is unlikely to have any
         foreclosure effect on the suppliers of those services.
4.4.3.   Conclusion
(197)    In view of the above, and considering all other available evidence, the Commission
         concludes that the Transaction does not raise any serious doubts as regards its
96     […] The Parties also overlap on "all travel" MSS and hotel MSS markets in Austria, Belgium, Czech
       Republic, Denmark, France, Finland, Ireland, Italy, the Netherlands, Norway, Poland, Portugal,
       Romania, Spain and Sweden; the increment of the Transaction on those markets is however estimated
       as marginal, not exceeding [0-5]%.
97     Additional markets would technically be vertically affected, namely (i) between the provision of hotel
       commercial affiliate programmes OTAs (or MSS and OTAs) and the operation of hotel OTAs
       downstream. However, this relationship is not created by the Transaction, as Momondo is not active
       in either the upstream, nor the downstream market; therefore, such relationship will not be further
       analysed in this Decision; (ii) between the provision of hotel commercial affiliate programmes OTAs
       (or MSS and OTAs) and the operation of "all travel" OTAs downstream. As however any input
       foreclosure strategy would only impact the operation of hotels OTAs and any customer foreclosure
       strategy the operation of hotels commercial affiliate programmes, it is only necessary to examine
       relationships between the provision of hotels commercial affiliate programmes and the operation of
       hotels MSS and OTAs.
                                                         36
 ---pagebreak---       compatibility with the internal market in relation to the vertical relationships to
      which it gives rise.
5.    CONCLUSION
(198) 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)
                                                   Tibor NAVRACSICS
                                                   Member of the Commission
                                              37