Block to Sabre’s acquisition of Farelogix upheld on appeal

UK Appeals Tribunal supports 2019 decision by the Competition and Markets Authority

A Competition Appeals Tribunal has upheld the Competition and Markets Authority (CMA) decision to block Sabre’s acquisition of Farelogix in 2019.

The tribunal dismissed Sabre’s challenge to the CMA ruling in a judgment published today following a hearing in November.

US-based Sabre, owner of one of the world’s biggest global distribution systems (GDSs), announced the acquisition of travel technology firm Farelogix for $360 million in November 2018.

The US Department of Justice (DoJ) announced an investigation and launched a lawsuit in August 2019, arguing the deal would eliminate competition in the distribution of air fares and “likely result in higher prices, reduced quality and less innovation”.

The CMA followed suit in the UK and, following an investigation, signalled it would block the merger pending a consultation on its findings. It found “airlines, travel agents and UK passengers would be worse off” if the deal went ahead.

A US Department of Justice anti-trust case against the Sabre deal failed in a US District Court in April 2020. However, the CMA formally blocked the takeover in the UK two days later, leading Sabre to abandon the deal at the end of the month.

Farelogix was subsequently acquired by airline technology firm Accelya in June 2020.

Sabre went ahead with an appeal against the CMA ruling, initially challenging the decision both on the grounds that the deal lay outside the CMA’s jurisdiction and that it had “irrationally” and “unlawfully” found the merger might damage UK consumers.

However, Sabre subsequently withdrew its challenge on the latter grounds and appealed solely on the basis of the CMA’s jurisdiction.

The tribunal, chaired by Mr Justice Morris, unanimously dismissed the appeal.

Andrea Coscelli, CMA chief executive said: “We’re pleased by this important judgment from the Competition Appeal Tribunal.

He pointed out: “Sabre did not challenge the substance of our finding – that the merger would lead to less competition and harm consumers – but sought to argue that we did not have jurisdiction over it.

“The tribunal upholds our view that the ‘share of supply’ test covers this type of transaction, where both companies compete closely and offer important products and services used by UK businesses, where less competition could have serious knock-on effects for UK consumers.”

The CMA noted Sabre and Farelogix “supply software solutions to airlines to sell flights via travel agents including those online.

“Their IT solutions enable airlines to create add-ons to tickets sold through agents such as seats with extra leg room, WiFi and meals. Additionally, the companies offer services to help airlines connect with passengers via travel agents.”

At the time the CMA blocked the takeover, it noted: “Farelogix has developed technology that allows airlines to offer more choice to passengers who purchase tickets from travel agents by way of customising their flight experience.

“Sabre does not currently offer this new technology but is investing in developing it.

“If Sabre were to buy Farelogix it will be unlikely to develop the technology itself. Airlines, and ultimately their passengers, will lose out from both this lack of innovation and the insufficient competition between the remaining companies in the market.”