The Competition Authority
has authorised the purchase by the Icelandic Tourist Board of the operations of Heimsferðir, on the basis of a settlement
which the merger parties have made to the regulator. With the settlement, the merged entity commits
companies to take measures that prevent
competition barriers that the merger would otherwise cause. The measures are
these:
- The combined company commits to
to ensure its independence from the Icelandair Group, by preventing
transactions between the companies except in specifically defined cases. Likewise
that the ownership links between the merged company and Icelandair are severed within
for a specified period and prevented the exercise of the right to vote until then.
- The merged company commits to donating
other travel agencies would be able to utilise seat availability on flights operated by the merged entity.
of a company with a wholesale business in aircraft seats. In the settlement, these parties are referred to as
„resellers“. This gives competitors, and thereby consumers, the opportunity to
to enjoy the potential efficiencies that may result from the merger, in the opinion of
merger partners. The travel agency operations run by Icelandair do not enjoy these
rights.
Decision 10/2022 on the merger can be accessed here.
Uncertainty about
Market development – a complex study
During the investigation
Regarding this matter, there has been great uncertainty about the development of markets in the travel industry, and that is the case.
Some uncertainty still remained. While the investigation was ongoing, the tourism industry
in the world for a time. Here at home, package holidays abroad were suspended.
at the initial stages of the investigation, but the operation then got under way with the closures
in between, as the COVID-19 pandemic progressed.
These circumstances
They greatly complicated the investigation of the matter, not least because of the conditions in the market.
they changed rapidly. The first studies suggested that the merger would entail
sees significant barriers to competition and that the proposed solutions which
The merger partners had put forward a plan that would not remove the obstacles from their path.
Mergers
decided to withdraw their merger notification and announce the merger
to the new, where it would be thoroughly investigated whether the merger could be authorised on
basis of altered conditions. Furthermore, an opportunity would be provided to investigate
more detail on the changes that were taking place in the market, including as a result of Covid-19.
Results
research – changes in the operating environment of travel agencies and the need for intervention
Main
The results of this study are as follows:
- The service market in question is the sale of domestic
A travel agency offering package holidays from Iceland. Although changes are taking place
The operation of the market or related activities has continued to have clear package holidays.
a distinctive feature, comprising service and security that sets it apart from journeys that
Travellers organise themselves (own bookings). Surveys that
The Competition Authority also had samples taken to show that the merging parties are close.
each other's competitors and VITA and travel agency activities by Icelandair
are the merger partner's closest competitors. It is therefore not possible to agree to them.
The merging parties' view that package holidays and direct bookings should be considered the same
market.
- Travellers' own bookings, however, seem to suggest otherwise.
to provide the merging parties with a certain degree of competitive constraint. The evidence in the case suggests, among other things,
that the weight of the sale of individual airline seats on flights operated by the merger parties is
increase.
- The Icelandair Group's strong market position
of the matter and related markets and recent changes in the group have increased
the competitive pressure that travel agencies are under. Icelandair has recently
Booked onto scheduled flight destinations where travel agents used to be
strong, in addition, organisational changes have aimed to harmonise more
measures travel agency operations and scheduled flights of Icelandair.
- In 2021, PLAY began flying to destinations
which the merging parties had previously pursued. Has this increased the availability of airline seats to
of these destinations and increased competitive pressure in that respect. Further
It remains to be seen what effect PLAY will have on package holidays.
- During the course of the proceedings, access restrictions have been imposed.
to the market, to the extent that recent legislative changes have reduced
costs associated with the insurance requirement for package holidays. Also, the availability of flight seats
increases, but a shortage of airline seats creates obstacles, not least for smaller
travel agencies. Furthermore, the regulator's data collection indicates that new players
can gain a turnover in the market.
- Notwithstanding the foregoing, it is clear that with
The merger will result in a significant market concentration for package holidays from Iceland.
In the opinion of the Competition Authority, there is particular reason for concern about
the position of smaller competitors after the merger, i.e. in particular the position of travel agencies which
are not in a position to hire or operate an aircraft on their own account and are
an agreement has been reached between the merger partners and domestic airlines regarding flight seats. Therefore, it is important that
that such travel agencies will be guaranteed access to airline seats, cf. the aforementioned
Conditions.
- The merger also increases the risk of coordinated
the behaviour of larger competitors in the market. Iceland's travel agency is among the larger ones
a shareholder in Icelandair and has in recent years purchased flights from Icelandair and VITA.
The supervisory authority considers there to be grounds for intervention in this regard, in accordance with the aforementioned conditions.
With reference to
In light of the above, particularly the last two points, the Competition Authority considered
it was not possible to authorise the merger without intervention. The merging parties therefore submitted
proposed conditions and led negotiations to the aforementioned agreement.
Possible
Review of conditions due to uncertainty
In light of that
the uncertainty that has existed regarding the development of the market during the period under review is in
The agreement provides for its review. This entails that the parties are in agreement on
that the Competition Authority can make changes to the terms and conditions of wholesale
to the benefit of resellers, provided that the agreement and terms
that those accompanying her are not achieving their objectives. On the other hand, the supervision is
also prepared to waive the wholesale conditions if it transpires that theirs
is not seen as necessary, due to changes in the market.
About
Icelandair
Í
This merger decision discusses at considerable length the position of the Icelandair Group on
the markets concerned and related markets. It should be noted that this merger case
is not the right forum to investigate clues, tips or
complaints about possible barriers to competition which may result from a position or
Icelandair's high-mindedness, or to take action due to such obstacles. Full reason
is, however, to monitor the effects of the Icelandair Group going forward.
in the tourism market.
About
Ownership of Arion Bank
With the merger
the dominance of Arion Bank hf. over Heimsferðir is brought to an end, but that dominance
were liable to hinder competition, cf. Decision of the Competition Authority no. 31/2019 . As previously, Arion bank will take a large ownership stake in
merged company. For that reason, the Competition Authority considers it important
that the bank could continue to the same points as those covered in the conditions
of the settlement up to the point when the bank has sold its entire shareholding
in a joint venture.
