Over the past decade, large technology companies’ M&A activity, and the subsequent effects on competition, have become a major flashpoint in antitrust debates about large digital platforms. This month, US online travel conglomerate Booking Holdings is seeking to overcome competition concerns around its $1.63B purchase of the Swedish flight-technology company Etraveli. The acquisition was initially announced back in November 2021 as part of Booking’s mission to “build a frictionless global flights offering”, but an ongoing open investigation carried out by the European Commission (EC) has thrown a spanner in the works. What went wrong? Read on to find out more.
The fundamental tensions at play here are focussed on market power. EU regulators are concerned that Booking.com’s acquisition of Etraveli could further entrench its stronghold over the travel industry, whilst also strengthening its position in car rentals and accommodation booking. This would be anti-competitive, increasing barriers to entry for new travel companies, as well as costs for hoteliers and consumers. Over the past few months, Booking has been negotiating concessions with the EC. For example, travelers who book flights with Etraveli will also be shown other providers’ accommodation options, to address the concern that Booking will only promote its own hotel and apartment services. Having said that, all current evidence seems to point towards the deal being blocked. Are there any circumstances where the European Commission will give the green light? Will these remedies be enough to sidestep their merger regulations? What operational changes would be required to make the transaction feasible? It remains to be seen, but here’s our take.
The digitalization of the global economy has enabled technology giants (such as Amazon, Google and Meta) to hold a growing concentration of corporate power. When a select few companies corner the market, they are free to set prices however they like, which becomes dangerous territory for market competition. Last year, the five biggest corporations together earned more than the income of the poorest two billion people in the world [source]. These monopolies are anti-competitive as they make profit, accumulation and growth exclusive to the 1%. How can we counterbalance this? There is an argument to reshape monopoly models to better serve public good, rather than prioritizing profit and expansion above all else. So, what would free and fair competition look like? In the case of Booking.com, adopting a more siloed, regional integration approach could unlock new possibilities. If European operations were separated from the powerhouse US headquarters, Booking will be forced to operate more efficiently, as they risk the pressure of being corrected by the local market, promoting innovation, a higher-quality service for consumers and healthier competition. Booking’s global stronghold would be lessened and the playing field would be leveled: smaller European rivals would have a fairer chance to gain a foothold within the travel marketplace.
The decision around the Etraveli acquisition is due to be made on 27th September. While we don’t know exactly what will happen, we do know that these next few weeks will be crucial for Booking to agree to enough concessions in an effort to secure the transaction with the European Commission. Chief Financial Officer David Goulden has already stated that they plan to fight back with an appeal if the deal is vetoed. How do you think this is going to play out? Is it time to liberate our economy from corporate monopolies? Share your thoughts in the comments below.
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