The UK Competition and Markets Authority (CMA) has said it will block Sabre’s acquisition of Farelogix unless a consultation on its findings leads it to modify its action.
In an announcement on Friday, the CMA reported it had concluded: “Blocking the merger may be the only way of addressing competition concerns.
“Farelogix . . . is a threat to Sabre’s business [and] Farelogix’s continued independence will likely motivate Sabre to innovate further, giving airlines more choices in connecting to travel agents.”
Sabre hit back, insisting the proposed takeover was “resoundingly pro-competitive” and suggesting the CMA “lacks jurisdiction” in the case.
The CMA reported its findings following a lengthy investigation of Sabre’s $360-million purchase of Farelogix after the hearing into the US Department of Justice (DoJ) case against Sabre’s acquisition ended on February 6.
Sabre announced the acquisition of Farelogix in November 2018. Farelogix is a leading developer of new distribution capability (NDC) technology for airlines and Sabre is one of the world’s leading global distribution systems (GDSs).
Explaining its findings, the CMA said: “Sabre’s acquisition of Farelogix could result in less innovation, higher fees and more limited choice of supplier for airlines” using IT systems to sell flights via travel agents and online retailers.
“Airlines want passengers booking via travel agents to have more choice over their flight experience.
“Farelogix has developed technology that allows airlines to offer this choice. Sabre does not currently offer this new technology but is investing in developing it.
“The CMA is concerned that if Sabre buys Farelogix it will not have the incentive to develop the technology itself and airlines, and ultimately passengers, will lose out as the companies will not be competing to provide a better product.”
The CMA is consulting on its findings and has asked for views by February 21.
CMA inquiry group chairman Martin Coleman said: “This is ultimately about passengers and their ability to get good value and innovative services when flying.
“Farelogix is at the forefront of a technological change in this industry and we are concerned that the merger will see airlines and their UK passengers miss out on the benefits from the continued innovation.”
The CMA said: “At this stage, the only remedy that CMA has identified as likely to be effective would be prohibition of the proposed merger.
“However, the CMA will consider other practicable remedies that the main parties or interested third parties may propose.”
A spokesperson for Sabre said: “We note the CMA’s provisional findings. We strongly believe no action should be taken by the CMA in this case, because the CMA lacks jurisdiction and the transaction is pro-competitive.
“We continue to believe that the deal, far from resulting in any lessening of competition, is resoundingly pro-competitive.
“This transaction will serve the interests of airlines, travel agents and ultimately consumers. By bringing our two businesses together, we will accelerate access to next-generation retailing, distribution and fulfilment products and services that the market needs.
“We will continue to cooperate with the CMA throughout the remainder of the process, including in our response to the Provisional Findings and Notice of Possible Remedies, and outline the benefits of the transaction for all stakeholders involved.”