“Competition concerns” have been raised as part of a probe into the acquisition of CWT Holdings by Amex Global Business Travel (GBT).
An independent Competition and Markets Authority (CMA) inquiry group provisionally found the proposed merger between two of the three largest corporate travel management companies “has the potential to substantially lessen competition”.
The independent group has now provisionally found that the merged company would be the clear market leader, and that the loss of competition between GBT and CWT as a result of the merger “would not be offset by competition from other suppliers in the market, which could lead to reduced choice and quality, and higher prices for the customers”.
The evidence assessed by the group, including share of supply estimates, bidding data, the companies’ internal documents, as well as information from customers and competitors, showed that GBT and CWT compete closely for global multinational customers, largely because of their scale and global coverage.
“As a result, the merged business would be, by far, the largest supplier in the market, with the second largest player around half the size of the merged business, and the remaining competitors less credible options for customers,” the CMA interim report said.
The investigation is the first conducted under the CMA’s revised process for ‘Phase 2’ merger investigations.
The deadline for submitting responses to the interim report is 5pm on November 27.
Martin Coleman, chair of the independent inquiry group assessing the deal, said: “Despite the increased use of video conferencing, business travel continues to be a necessary component for effectively doing business for many companies and a major area of expenditure.
“Business travel also plays an important role in the UK economy, facilitating global trade, supply chains, knowledge exchange and international investment.
“A cost-effective, good quality and efficient business travel sector is therefore an important underpinning element of UK productivity and economic growth.
“We have provisionally found that only a small number of business travel agencies are considered capable of meeting the needs of the largest companies and this deal could reduce competition and increase costs.”
On the new Phase 2 process, Coleman added: “We know businesses have been keenly awaiting our incoming changes, which are designed to deliver a timely step change in aspects of the way the regime works.
“The effectiveness of our new process is evidenced by the additional and more open engagement we have had with the companies, and other businesses affected by this deal. This has also allowed us to make our provisional decision earlier than under the old process.
“We now look forward to engaging further with the companies on our provisional decision, including meetings with the businesspeople.”
The new process is designed to enable more, and earlier, opportunities for the merging companies and other businesses affected by a merger to engage with the inquiry group overseeing the investigation, as well as streamlining aspects of the investigation to the benefit of all stakeholders.
The US Department of Justice is also reviewing the transaction.
Amex GBT said it “:fundamentally disagrees” with the CMA’s interim assessment that the transaction may result in a substantial lessening of competition in the UK.
Chief legal officer and global head of mergers and acquisitions Eric Bock said: “We are disappointed by the CMA’s interim report.
“The CMA has not appreciated the evidence that reflects the breadth of the business travel industry and its dynamic and competitive nature.
“In recent years, numerous travel management companies have expanded their offerings while other companies have entered the industry and are rapidly growing their businesses.
“We are reviewing the interim report closely and will be responding to the CMA’s concerns.
“We firmly believe that the proposed transaction would result in many customer and supplier benefits and that the business travel industry would remain highly competitive.
“We will be engaging further with the CMA to demonstrate why its concerns are not justified.”
GBT continues to expect the transaction to close in the first quarter of 2025.