The Competitions and Markets Authority (CMA) has raised concerns over the proposed acquisition of Farelogix by Sabre, saying that blocking the merger “may be the only way” of addressing competition issues.
In June 2019, the CMA launched an investigation into the acquisition, which was announced in 2018, to determine whether the merger would limit competition in the airline distribution market and therefore ‘reduce innovation’ in the industry.
The watchdog later slammed Sabre with a £20,000 fine in the second phase of its inquiry for failing to provide certain documentation before a deadline. At the time, the CMA claimed the company had submitted redacted versions of the documents, but later admitted they did not contain sensitive information.
Now the CMA has said its investigation has raised concerns that the merger “could result in less innovation, higher fees and more limited choice of supplier for airlines” and that “as a result, UK passengers would be worse off”.
The issue at hand is that Farelogix has developed NDC technology that will provide travel agents with the ability to offer customers more customisable options during the booking process, such as specific meals or ancillary products such as extra leg room or baggage.
Sabre is also investing heavily in the new distribution standard through its Beyond NDC programme, but the CMA is concerned that “if Sabre buys Farelogix it will not have the incentive to develop the technology itself and airlines, and ultimately their passengers, will lose out as the companies will not be competing with each other to provide a better product”.
As a result, the CMA said it believes the right decision would be to block the acquisition, but it is currently consulting on its provisional findings and is accepting input until 28 February.
Martin Coleman, chair of the CMA’s inquiry group, commented: “This is ultimately about passengers and their ability to get good value and innovative services when flying. For this to happen it’s really important that airlines have a good choice of supplier for this type of software solution to make sure services are cutting edge. Farelogix is at the forefront of a technological change in this industry and we are currently concerned that the merger will see airlines and their UK passengers miss out on the benefits from the continued innovation.”
A spokesperson for Sabre hit back at the statement, saying the company believes “no action should be taken by the CMA in this case because the CMA lacks jurisdiction and the transaction is pro-competitive”.
They added: “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 Phase 2 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."
Meanwhile, a court in the US state of Delaware has been hearing evidence in a Department of Justice (DOJ) lawsuit against Sabre in relation to the merger. BBT’s sister website The Beat has been reporting from the courtroom. To read the coverage, click here to subscribe.