Action by regulators in both the US and UK threatens consolidation at the top of the corporate travel sector, reports Ian Taylor
The obstacles in the way of Global Business Travel (GBT) Group’s $570 million takeover of corporate travel rival CWT ramped up last week when the US Department of Justice (DoJ) filed an antitrust lawsuit to block the merger.
The case, filed in New York, argues the proposed transaction would harm competition for business travel management services in the US.
The takeover, announced last March, would combine the world’s largest and third-largest travel management companies (TMCs) but already faced a potential block in the UK where a Competition and Markets Authority (CMA) interim report in November found it “may result in a substantial lessening of competition”.
The CMA had been poised to publish a final report on the takeover this month but announced a six-week extension of the deadline to March 9 last week.
The report in November calculated GBT and CWT’s “combined share of supply” in the UK to customers “with total travel spend of over $25 million and requirements spanning the globe” at 60%-70% and concluded: “The merged entity would be the clear market leader.
“The evidence from the shares of supply, booking data, the parties’ internal documents, customers and competitors is consistent in showing that the parties, alongside [rival TMC] BCD, are by far the largest TMCs supplying business travel agency services to global multinational customers, with the merged entity around twice the size of BDC.
“We found little evidence that any other TMCs compete for global multinationals to any meaningful extent.”
The report acknowledged “the ongoing technological innovation in this market” but stated: “We have not seen evidence that technology could substitute a comprehensive business travel agency offering, or that tech-led competitors are likely to become material standalone competitors.
“The effect of this merger would be to combine two significant and close competitors . . . with few meaningful alternatives and significant barriers to entry and expansion.”
The report noted: “Both parties global multinational customers include companies that play an important role in the UK economy.
“Our provisional finding is that this merger would lead to a significant reduction in competition in the supply of business travel agency services to global multinational customers, which would allow the merged entity to raise prices and/or degrade non-price aspects of its competitive offering to customers.”
The CMA had confirmed its referral of the takeover for an “in-depth investigation” last August after GBT gave notice it would not provide the undertakings the CMA sought.
Deal ‘will further consolidate an already consolidated market’
The US Justice Department’s antitrust lawsuit against Amex GBT’s takeover of CWT places a significant hurdle in the way of the deal, although the inauguration of a second President Trump administration may see changes at the DoJ.
The DoJ filing noted Amex GBT had acquired four other rivals since 2018 and that CWT had sought to win business from GBT, leading the latter to lose several significant bids for business, and that GBT sought to consolidate the market in response.
The filing argued: “If Amex GBT is permitted to acquire CWT, this intense competition would be lost, risking higher prices, less innovation and fewer choices [for businesses].”
Acting assistant attorney general Doha Mekki of the DoJ’s antitrust division said: “This is the latest in a series of acquisitions by Amex GBT that will further consolidate an already consolidated market.
“American businesses will face the consequences, seeing higher prices, less innovation and fewer choices.”
Amex GBT accused the DoJ of taking “a backward-looking view of the market” and argued: “The complaint completely disregards the emergence of numerous significant competitors in the industry and takes an intensely narrow view of competition.”
An Amex GBT spokesperson rejected the idea that the takeover would harm large customers, claiming it “would bring significant benefits to customers, suppliers and employees”, and accused the DoJ of presenting “a distorted view of the marketplace” supported by “factually incorrect statements”.
The spokesperson added: “We’re evaluating our next steps.”
CMA accused of accepting ‘unsubstantiated and misinformed views’
Amex GBT and CWT responded furiously to the CMA’s interim report in November, denouncing it as “an unrepresentative and backward-looking market investigation” and of adopting “an approach that is self-proving and circular”.
The companies insisted business travel “is a highly competitive market” and customers have “numerous options to choose from” and suggested “the market dynamics and competitive conditions described in the report do not reflect reality”.
They accused the CMA of adopting “a fundamentally erroneous market definition” for global multinational customers “that does not exist in reality”, based on “unsubstantiated and misinformed views about different customers’ requirements”.
In their official response, the merger partners also accused the authors of the interim report of a “failure to consider properly . . . all the evidence before it, the failure to investigate key issues, as well as misinterpretation of . . . evidence and data submitted by the parties, their customers and competitors”.
They argued the report “describes an artificial business travel market that does not reflect reality and finds competition concerns that are not substantiated” and insisted: “The transaction should be allowed to proceed.”