In Conversation With the Booking/eTraveli Team

Welcome to Cleary Gottlieb's Antitrust Review, a podcast focused on antitrust enforcement, policy and practice. In an increasingly complex and noisy world, we strive to provide insight, clarity, wisdom and light. My name is Nick Levy and I'll be your host today. Our topic today is one of the most significant merger decisions rendered by the European Commission in recent years. The prohibition of a then proposed acquisition by Booking, a leading operator of online booking travel services for hotels, Avitra Valley, an operator of online booking travel services for flights. As you're here, the companies which are co-operated for several years plan to create a one-stop shop for consumers to book hotels and flights on the same platform. The transaction was categorized as a conglomerate merger, as it involved no horizontal overlaps or vertical relationships. The commission never less prohibited it, in a landlord decision that's notable for several reasons. First, the transaction, what of only 30 or so mergers prohibited since the EU merger regulation came into force in 1990, was the first conglomerate merger to be prohibited by the commission for 25 years. Second, unlike virtually all non-horizontal mergers that have been challenged by the commission, the decision as you're here departed from the framework set out in the non-horizontal merger guidelines and did not alleged or find that any competitor would be foreclosed. Third, and this is really the crux of the decision in finding that even a modest strengthening in bookings alleged dominant position could significantly harm effective competition. The decision represented a return to highly rigid interpretation of the EU merger regulation substantive test that many thought had been abandoned when the regulation was revised in the early 2000s. Fourth, the rationale for the transaction, the company's plan to create a one-stop shop, was cited against them in what some consider to be a reincarnation of the efficiencies offense. And finally, the decision established an entrenchment ecosystem theory of harm that was maintained and developed in the recently issued draft merger guidelines as part of an effort on the commission's part to embed a novel theory of harm that could be used to challenge acquisitions by dominant technology companies. Bookings appeal of the commission's decision was therefore eagerly awaited. To the surprise of many, the court's judgment, which was rendered last week, upheld the commission's decision. Here to discuss that decision and the court's judgment of five leading experts, Anita McGreiner-Oliver, who advises many technology and other firms on high stakes mergers, Chris Cook, who's been involved in numerous conglomerate mergers over the years, and co-authors with me, the leading treaty on the EU merger regulation, Amarilis Mula, who's one of the leading lawyers specialising in digital regulation in Europe, Dan Gore, an economist with RBB economics, who advised booking on this transaction, and Enrique Gonzalez-Dias, one of Europe's leading competition lawyers, who led the booking team on the appeal to the court. We'll be discussing the facts of the case, the commission's decision, and the court's judgment. Anita, let's start with you on the facts of the case and the theory of harm the commission advanced. Thanks, Nate. Perhaps let me start with three key facts about the party's interest in the action and its rationale. So, as you were just saying, Nate's the first point is that this was a conglomerate transaction involving complementary businesses. Buking says from principle business is accumulation, including hotels and vacation rentals, while e-traveling is flight. Buking also allows consumers to one-stop shop for accumulation flights and other travel services on a single platform using a combination of its own offering, but also commercial agreements with other OTAs. So, it will have been a combination of complementary accommodation, including hotel and flight OTA capabilities. So, second fact is that booking and e-traveling already had an established commercial relationship. Since 2009, e-traveling had powered Buking's flight offering, bringing flight customers to booking, and the partnership had progressively deepened and I think very successful. So, this was not a move from no flight offering to having one. Rather, the transaction would have taken the existing partnership a step further from contractual cooperation to booking holdings, owning and operating e-travelized flights OTA business. A third important fact is, as we were saying, booking is rational for the deal, which appeared to be different from the focus of the commission assessment. Booking holding explains that the acquisition would improve the quality of its flight offering. It's really insisting on building a friction as double flight offering and improving the flight booking experience. That was really the core of the rationale, according to the announcement at the time. Instead, the commission focused on the value of flight as a custom acquisition channel for a hotel OTA, considering that acquiring e-traveli would generate a difficult additional customer traffic and thus additional opportunities to cross sell hotels. Now, if you move to the commission's serial farm, the starting point was that the commission found that booking was already dominant in hotel OTA services in a market characterized by strong barriers to entry and expansion. There are really two market features that the commission insisted on and that became central to its serial farm. First, network effects. The more travelers on an OTA has and more attractivities to hotels and conversities and more hotel it has and more attractivities to travelers. The commission describes this as a self-reinforcing dynamic that is difficult to break for smaller OTA's and new entrants. The second-mounted features was customer inertia. The commission found a strong degree of customer inertia with about half of customer searching only one hotel OTA before making a purchase. Because booking was already the largest OTA, hotel OTA, the commission found that this customer inertia was disproportionately benefiting booking. So in short, the commission's theory was that acquiring e-traveli would give booking an important additional customer acquisition channel and thereby increase various to entry and expansion for rival hotel OTAs. That theory had forced that if you want to break it down. First, transaction would bring booking additional flight traffic and more opportunity to cross sell to hotel OTA services. Second, booking would be able to turn some of that additional traffic into hotel customers and make its platform stickier thanks to that customer inertia and customer loyalty phenomenon. Third, stop, the transaction would reinforce network effects that would just describe and therefore would make it harder for rivals to build a customer base attractive to hotels. Fourth step, that would increase various to entry and expansion, make booking's dominant position less contestable. So critically, like the commission theory didn't depend on booking actually increasing its market sharing hotel OTA, it was really about that increase in various to entry and expansion. Finally, the commission sought to quantify the alleged increment in the hotel market. In the public decision, you will see that the precise estimate are redacted, but we can see that the range is below 5%, so a very small increment depending on the methodology. The commission position was whatever the precise increment, what matters is that the transaction would increase various to entry and that was enough to show its strengthening of booking dominant position. One final bit, essential factual point, the counterfactual, so as we were saying, booking already had an entirely powered flight offering before the merger, so the merger specific question was really about what the ownership of the Traveller E-travel I would add, which the commission acknowledged, and however, when it calculated the hotel market increment, it used a zero flights scenario as a baseline saying that it could not quantify the alternatives in a reliable manner. So in short, the commission saw Traveller as getting booking more traffic, more consumer data, cross-selling opportunities and making the platform stick here, that was the reason why the commission saw that the transaction would make booking themes in position less contestable. Thanks so much, Anita. I'd like to turn to Chris now. Chris, we've worked on many conglomerate mergers over the years, including the General Electric, Honeywell merger, perhaps the most famous conglomerate merger to be prohibited. You've written about the topic, you've thought about it, you've studied the non-horizontal merger guidelines, which are based largely on this notion that certain cases conglomerate mergers can foreclose rivals. why the Commission decision in the booking case was so significant? Sure. Thanks. Well, most obviously, as you said, this is the only conglomerate merger that commissions blocked in 25 years. So that in itself is pretty significant headline. The commission has been reviewing conglomerate mergers more carefully over the past decade than it did in the previous one. It has extracted remedies in several, but the fact pattern and the theory of harm here are different from the prior cases. The commission's recent interest in conglomerate mergers has been focused on concerns around foreclosure of the acquired firm's rivals via the degradation of interoperability with the dominant firm's products. These are cases like Synopsis Ansys, Broadcom VM where a few others in recent years. By contrast here, the concern as a need to say was the strengthening of a dominant ecosystem itself. The commission had previously discussed ecosystem related theories of harm in a couple of cases, but not with the same focus as here. For example, in Google Fitbit, the main theory of harm was that Google would leverage interoperability with its Android operating system to foreclose rivals of Fitbit wearable devices. And the remedy on the basis of which that deal was cleared was for Google not to discriminate against Fitbit's competitors. The situation was similar in Amazon iRobot, for example, the commission's worry was that Amazon would use its marketplace to disadvantage and foreclose vacuum cleaner competitors of iRobot. By contrast, in booking ETG, the concern was not that ETG's competitors in flight booking services would be foreclosed, but rather that booking's dominant position in hotels would be strengthened as a result of adding new complementary feature services to its travel reservations ecosystem. That is new. The commission thought it was important enough that as you said this year, they added an entirely new category of competitive effects, anti-competitive effects, to the new merger guidelines called entrenchment of a dominant position, which is based entirely on the theory of harm in booking. Under the guidelines, entrenchment occurs when the merged firm gains control of products or assets in a way that structurally creates or reinforces existing barriers to entry and expansion, resulting in reduced market contestability. That's a new notion. It's extremely important for merger control across the digital economy in particular, and it's why people were keenly anticipating the general court's judgment. Chris, thank you. Let me turn to Dan Gore. So Dan, you advised booking before the commission, you're an economist, from an economic perspective, why is the commission decision so significant? Thanks, Nick. Thanks for the chance to talk about my favorite case. As you say, I've been working this for almost five years now, so I'm either very well placed to comment on it, or I'm the King Canute of non-horizontal mergers. To start with the theory of harm, there's been quite a few iterations, I think, through the process of what the theory of harm was. At the time, the decision, the commission referred to this as an ecosystem theory of harm. Now, the decision to my mind didn't clearly articulate what an ecosystem was. Footnote 229 described the situation as being one where booking offered or would offer a wide range of services that cover multiple facets of the travel experience. Now, to my mind, that doesn't differ from a standard conglomerate transaction with complementary products and common customers. In my mind, an ecosystem concern relates more typically to barriers to switching and interoperability, which are not the case here. We have no interoperability issue between buying a flight from one provider and buying a accommodation from another provider. We can now perhaps consider this theory of harm in the context of the entrenchment theory in the draft guidelines that Chris mentioned. And I think there are parallels between the judgment we now have and the decision and the theory that is set out in draft guidelines. Now, the other ways we looked at it were that the parties during the administrative process argued that this was a case of reverse leveraging of trying to use a position in flights where there's no question of dominance to influence the coal market, bookings, accommodation, OTA product. There's a lot of different terminology here, but to my mind and economist, this always comes down to question of effect. What is the effect of the merger on the markets in question? And that is an evidence-driven question. So this was the approach the parties took during administrative process. We focused on what is the effect of this given the market facts. And what we did was we focused on a model that tried to forecast what the impact of this transaction would be on the accommodation market. I'll take a few moments to talk through this model because it proved quite central to the decision and was also touched on the judgment. So the model that was used referred to as a TVM, the transaction valuation model. It was an adaptation of modeling undertaken by booking to assess the transaction before it entered into it. This is not some complex merger simulation model for the Greek symbols and abstract economics. It's a way of synthesising the various parameters in the market that affect how likely consumers are to buy a accommodation having bought flights from the same provider. Now, as I need to mention earlier, an unusually rich position of evidence in this case because of the pre-existing commercial agreement between the parties. We didn't have to predict or speculate or forecast how consumers might respond to the opportunities to buy flights and accommodation from the same provider. We had actual evidence of consumers doing that through the commercial agreement. And that was one of the key inputs into the modeling that we submitted during the administrative process to forecast what the impact of this transaction could be. Now, what we find is that the increment, the additional sales that the booking could gain in a combination OTA market, would be very small, tens of a percentage points. And this finding was consistent with the industry facts. So first, there's very little overlap between the customer bases here. A lot of customers that purchase flights do so directly from airlines, they don't use a flight OTA. So only a fraction of all flight consumers are using a flight OTA and only a fraction of those consumers are using e-traveli. So there's very limited overlap in practice between the customers who might want to accommodation and those are traveling or they'll be coming through the e-traveli route. So that already gives you a sense that there's limited scope for an impact here. Moreover, there's evidence on consumer preferences towards an ability to mix and match between flight and accommodation. The whole trend in the travel industry last 30 years has been away from package deals and towards consumers using the internet to piece together their own preference of flight and accommodation. And that's supported by a series of industry players who've established businesses to try and facilitate this process to make search costless or a low cost for our travel services. So if you go to Google flights, Google hotels, it's very easy to check who is offering the best deal on accommodation flights and given the cost and the frequency of these perks of these products, consumers have an incentive to go and do that. So the evidence from the TVM was consistent with the industry facts and suggested very low increment and the commission spent some time in its decision considering whether that increment could be higher. It adjusted some of the parameters, it got to a materially higher number in terms of around 50 fold higher than the parties argued, but still, as I need to mention, below 5%. And then finally, it's just worth noting that in the alternative, the commission put forward the argument that notwithstanding the small increment found, if there were, if it were the case, there would be any positive increment in accommodation OTA sales for booking, that in itself could be sufficient to constitute an SIEC. Thanks, Dan. So the scene is set for the appeal in Rickeg and Zalasdeus, whom we're going to hear from shortly led the booking team. As many may know, he's thought about conglomerate mergers, possibly the exception of Chris about as much as anyone in Europe. He was at the European Commission at the time of the General Electric Honeywell case, led the team there, also involved in the Tetral of L. Cedar case, where the court overturned a prohibition of a conglomerate merger, finding that the more speculative the theory of harm, the more plausible, the stronger the evidence needs to be. In Rickeg, you fought this case before the court, sure you disappointed with the outcome, I've been incredibly interested on your perspective of what the court found and why you believe it's wrong. Thank you very much, Nick. And indeed, I've been dealing with conglomerate mergers for over three decades, including, by the way, in the context of the drafting of the non-horizontal merger guidelines discussed in this case. So I will give you my perspective on this matter and in doing so, I may need to reiterate some of the key points identified by my colleagues. This is not a case where booking was buying a major rival in hotel bookings, such as, say, Expedia. This was about booking acquiring E-Tradally, a flight ODA. And, as Anita said, their activities are made mainly complementary. In addition, the commission did not prohibit the deal because booking would likely use its alleged dominant position in hotels to monopolize the market for flight OTAs. That would have been a standard foreclosure story where a dominant firm buys a company in a complementary market and relies on its dominant position to acquire market power in that market. The theory of the commission was different, and that is what I think Dan was referring to when using the term reverse leverage. The commission theory in this case was that booking would acquire a strong flight business, not a dominant one, not even one that would likely enjoy market power in the flight OTA business, but just a strong player that could attract flight traffic and that could in turn generate customer data. And it is this increased in traffic and customer data that could be used by booking to cross-sell hotel bookings to flight consumers and to increase or not is hotel customers. As mentioned by Anita and Dan, the commission believed that this opportunity to sell more would reinforce network effects and as a result bars to entry and expansion and that that would in turn strengthen booking's dominant position by making it harder for hotel OTAs to expand in the market. That was in a nutshell the theory at the heart of the commission's case. A theory based on the idea that relying on the market position of a non-dominant complementary product can harm competition. This is a novel proposition. In fact, the economic presumption as Dan can comment on that later and as reflected in the non-horizontal merger guidelines themselves is that merges between complementary products are likely to be pro-competitive and only rarely problematic. Conglomerate merges can lead to anti-competitive effects when the merging parties have the ability and incentive to tie, bundle or carry out other commercial practices likely to lead to anti-competitive foreclosure. The commission has indeed historically challenged transactions only when the merge entity had the ability and the incentive to adopt certain commercial practices that would distort consumer choice to the detriment of competitors. But in booking the commission did not challenge the transaction on this basis, but rather on the contention that buying an attractive but non-dominant provider of flight OTA services would make the booking platform more attractive, draw more traffic data and ultimately possibly more customers. That, in the commission's mind, good and hands network effects and a serisol could make the position of booking less contestable. In my opinion, this approach raises at least two fundamental questions of law, economics and policy. One is whether the mere fact of having a better chance to cross sell to more consumers on the marries that is without resorting to practices that may distort customer behavior such as anti-competitive time or bundling can be characterized as a foreclosure strategy as claimed by the general court. The other is whether an even assuming that cross selling on the marries could be considered as a foreclosure mechanism, which I dispute, the impact of such cross selling is significant enough given the counterfactual to reduce the ability of rivals to compete, including to challenge bookings, butative dominance in hotels. These are two of the key questions raised by the judgment. According to the judgment, the fact that the marriage entity would be able to cross sell and thus compete on the marries would be irrelevant. In other terms, the fact that booking may be selling on the marries without time or bundling would be irrelevant for the purposes of establishing whether cross selling constitute foreclosure. And this is so because the notion of competition of the marries, so the court says, would be foreign to merger control. This is in my opinion more than contestable from a legal, economic and policy point of view. As to the second question, as we have discussed before, the general court is of the view that even if the cross selling activity of the merger entity has a clear the minimis effect on market shares, either at the consumer or at the hotel levels, the transaction can still be blocked on qualitative grounds. Essentially because the merge entity would have a more attractive product and as a result it would be harder for rivals to compete. And that, I repeat, even if the impact of the transaction on market share is, as in this case, the minimis. This position is, in my opinion, another fundamental and problematic question of law, evidence and burden of proof raised by this judgment. And if you allow me, I would briefly explain why I think that the judgment is fundamentally wrong on these two questions, both as a matter of law and economics, but also as a matter of policy. We know what the causal chain in the commission's reasoning is. In some it traveling would improve bookings, flight offering, because post-transaction the platform would be able to offer a better integrated hotels and flight solution. More flight traffic and data would create more opportunities to cross sell and some of these cross selling may actually lead to increased customers. And these increased customers may encourage hotels to provide more inventory to bookings, which in turn would attract more customers in the typical workings of network effects. And all that would make it harder for competitors to build and expand a customer base. The commission called this, as Dan mentioned before, an ecosystem concern. But for me, despite the fancy label, this ecosystem just meant cross selling flights, hotels, and perhaps other services through one platform. That is what ecosystem effects meant, and nothing more. In other terms, the theory is that, as in any supermarket where you are able to sell groceries and drinks and so on, booking as many of its rivals would be able to sell hotels and flights on the same platform. This theory is not premise on any obligation to buy a flight and hotel together. That was dismissed by the commission itself, which did not consider that the transaction would create the ability or incentive to tie or bundle or to create a close technical architecture, preventing customers from booking a flight through one provider and a hotel from another. In fact, the judgment admitted that this industry is characterized by the presence of multi-homing and also accepted that consumers remain free to choose. So we are not in a context where the transaction somehow creates a wall garden, which would prevent customers from shopping around and consider other options. So at least in this case, as I said, the building ecosystem is nothing but a proxy for the ability to cross sell on the merits. That is what the commission considered to be the basis for the problem and what the court apparently deemed sufficient to block the transaction. So my opinion, the case turned first on equating competition on the merits to foreclosure. And this is so because for the court, cross selling, even if it is not based on time or bundling, actually constitutes a means of foreclosure, which, in my opinion, practically eliminates the fundamental distinction in law and economics between horizontal murders leading to the elimination of a rival and conglomerate murders where there is no elimination of a rival and where the very complementarities and cross selling opportunities created by the merger are not just neutral but often pro-competitive, even if competitors may lose share or have to compete harder post-transaction. That is to say, the very basis of a conglomerate murder is that the complementarities created by the transaction are not and should not be problematic. Even if the benefits of the one-stop shop or the cross selling opportunities brought about by the transaction may lead to some loss of market share on the part of competitors. But well, the core disagrees and considers that a cross-selling activity is in fact a mechanism of foreclosure and can be the basis for blocking a transaction. Again, even if the effects of this cross-selling is too weak in competitors on the merits, in my view, this is nothing else than an efficiency offense and a position that is not compatible with the non-horizontal merger guidelines for the regulation. But that is not the end of the analysis. The commission also considered that even if the transaction doesn't increase in any material way the market share of the merged entity, it can be blocked on qualitative grounds. In endorsing this view, the judgment, I think, is also flawed and inconsistent with the case law of the European courts. And I'm referring to continental Kant, our caste and tetra-Laval Sidel to name a few, where the court has confirmed they need to prove a significant impact on the ability of competitors to continue to compete with the dominant firm as in the counterfactual. I would like to say in this respect a couple of words on the interplay between qualitative and quantitative evidence. What I understand the court to say is that despite the fact that the European Commission made many mistakes in the quantification of the effects of the transaction on market shares and considered and accepted that the Commission did not manage to show anything other than the minimum impact on market shares in the tens of a 1%. The Commission was entitled to rely on what they called qualitative evidence to block the transaction. For example, because flights are supposed to be an important customer acquisition channel because CTG was a growing and important competitor in the market for flight OTAs and because the market is characterized by network effects and some alleged loyalty and inertia. The problem with this approach is that all these factors were, in fact, the basis for the economic model that then referred to before. In other terms, all these factors were at the basis of the economic model that measured the impact of the transaction on market share. And so when the court says, well, I understand that you have included all this in your model and that the results of your modeling is that there will be practically zero impact on market conditions, but I can nonetheless recycle these very factors as qualitative factors to challenge and block the transaction, I think that the court is fundamentally misunderstanding the use of evidence in merger control cases. This amounts, my opinion, to creating a presumption that anything that improves the market position of a dominant firm amounts to a strengthening of dominance because even if it is marginal, it may make it a little bit harder for competitors to compete and importantly to unduly recycle the very factors informing the quantification of the effects of the merger into qualitative factors that essentially repeat what had already been measured and found to be the minimum is, with the view to concluding, without more, that the transaction should be prohibited. That, I think, is a fundamental flaw in the court's judgment and a flaw that is, in my view, compounded by the fact that the judgment also unduly lowers the commission's burden of proof by claiming that the commission can prohibit the transaction that could and not would significantly impede effective competition. That's raising another point of legal dispute. That of the legal standard to prohibit a congruomerate merger which appears to be lower than the standard established by the European Court of Justice in the CK judgment. And even assuming that this standard were to be correct, which I dispute in this case, that is, that the transaction that would make it harder for competitors to contest the existing dominant position of the emerging parties, implying that the theory is not whether the transaction will prevent competitors from eroding the market share of the dominant firm, but just make them compete harder on the merits. The reality is that both the commission itself and the court acknowledge that in the counter factual, in the absence of the transaction, booking would have continued to grow. In other terms, it was not the case, again, in the counterfactual that booking was losing market share to competitors or likely to lose market share to competitors and that the transaction would somehow prevent competitors from continuing to erode that position after the deal. This was not the case. The counterfactual was simply one where booking was continuing to grow and where this transaction may have added a tiny amount of share increase. There was no evidence whatsoever in the file and the court doesn't refer to any, showing that this tiny increment of market share would have prevented competitors to continue to compete in the way they were competing in the counterfactual. As a result, and by way of conclusion, relative to the standard more recently endorsed by the court in Tower Castan others, I don't see how this approach can legally pass master if properly assessed in the context of Anapil. So thanks, Enrique, very interesting as always. I think there was so much of interesting what you said. From the cheap seats, I think the significance of the judgment to my mind and its vulnerability before the Court of Justice, if an appeal is launched, lies in its departure from the analytical framework that the Commission developed 20 or so years ago, both with respect to horizontal mergers and non-horizontal mergers. What united the guidelines in both cases seems to me was a strong emphasis on quantification, determining whether prices will likely to go up materially due to the loss of competition in a horizontal merger, measuring a foreclosure effect, determining incentives by calculating what the benefit of a foreclosure strategy would be against the cost of it. And those were the load stars really of the guidelines. As I read the judgment, what it does is it sets aside quantification. Yes, Commission, you spent a lot of time trying to calculate the strengthening here. You estimated zero to five percent, what you didn't get it right, but it doesn't matter. You don't have to show that the existing levels of competition would be reduced. It's enough that the transaction and 467 and 468 of the judgment, I think, are the critical ones would sustain that level of competition to the benefit of the parties and that the market might become consolidated and perpetuated based, as you've said, on qualitative rather than quantitative evidence. And so I think this judgment, if it stands, would give the Commission greater latitude to find that any maintenance of the pre-existing market structure, even if there's no obvious evidence of strengthening could be a sufficient. So quantifying the significance of any strengthening is essential. Not only because without it, the notion of a significant impediment to effective competition is devoid of meaning, at least the significant parties, but also because you need to quantify what the harm is in order to balance that harm against the efficiencies that the Draghi report and indeed the draft merger guidelines encourage merging parties to calculate and to evidence and to provide to the Commission. So what does that mean in the booking case? It means that even if the Commission is right, which as you've heard in Ray Kay and others believe it's not, that the Commission had discharged its standard in showing that the transaction would give rise to a significant impediment to effective competition because the conditions of competition that exists today would be maintained and booking is positioned augmented in some way. The consumer benefits that you've heard about, too, wouldn't need to be taken into account and you need to balance the tube, so you need to quantify the harm in order. to determine what that means and whether the benefits that would be available to all consumers in the form of a one-stop shopping platform would outweigh that home. Anyway, enough from me, let me turn to Amarilis and then to Dan to talk about their perspective on the implications of the judgment. Amarilis. Thank you, Nick. I'm happy to add to this discussion a bit, taking a step back what all of this means for parties who seek to do deals. Because on the one hand, as we have explained, we think that the judgment overstepped the boundaries of the eomaterialic regulation in several respects. And let me just recap three reasons. The first one is, Enrique is also emphasised, that judgment maintains that a significant impediment of effective competition can arise merely by the reason of an unquantified consolidation and perpetuation of a weakened competitive structure rather than requiring proof of a concrete merger-specific reduction in competition. And second, the judgment endorses the use of pro-competitive elements such as in this case, the offering of a seamless one-stop-shop experience to demonstrate harm by treating customer convenience as ecosystem leverage. And in essence, as Nick here, Enrique, you said this is what we call the efficiencies offense. Third, the judgment files that the EC can rely on purely qualitative indicators, even when quantitative evidence is clearly available to the reality or not of the alleged qualitative argument. That said, until and unless the judgment is overruled by the Court of Justice, it does present a new reality for parties that do deals and they will need to grapple with that. And in order for it to make it more likely for the deals to be cleared, we advise that the emerging parties take account of the following. First of all, parties should seek to differentiate their deals on the facts. So for non-dominant companies, they should for sure argue that this judgment, and in particular, the whole entrenchment theory of harm, is not relevant to their deal at all. Now for dominant companies, it is important that they argue that none of the elements that contribute it in this case to the alleged perpetuation of the weakened competitive structure are present. And to recap, in this case, it mainly turned around network effects and consumer inertia. This leaves, of course, a clear opening for companies in more traditional industries in particular where various to entry are lower. And I do want to put a footnote here because the entrenchment theory, as they appear in the draft merger guidelines, actually seems to be a bit wider than just referring to network effects, also referring to economies of scale, which would, of course, affect more deals in more industries than just the digital in which the digital context in which the BHA-ETG merger took place. Now, on the counterfactual, just to recap, in BHA-ETG, the counterfactual, they less of a role, because ultimately the court found that it did not change much to the outcome of the case. Now, we advise parties that where the counterfactual could be a difference to present the clearance substantiated counterfactual and show how it makes a concrete difference in the competitive assessment. In relation to quantitative evidence, even though the court said that quantitative indicators or qualitative indicators can be sufficient, we advise parties to present compelling evidence on the lack of anti-competitive effects, because by presenting strong quantitative data, parties at least maximize the chance that the EC engages with their evidence. In relation to rebutting any theories of harm, the parties should no longer rely on this dichotomy between horizontal and non-horizontal theories of harm, because basically, as explains the judgment does away with that. But this is actually not just driven by the judgment, we also know that in the draft merger guidelines, there is no such separation anymore, because this overhaul where currently there is no distinction between horizontal and non-horizontal deals anymore. Now, on the pro-competitive narrative, based on the judgment, it is very clear that it's important to bring such a pro-competitive narrative. And that is on the one hand, and this is always something we tell our clients, is you need to win the hearts of the regulators, you need to tell them the benefits of a transaction. And this is also in the spirit of the drag reports, which calls for EU merger control to foster scale investment dynamic innovation, and it is also very much captured in this principle of theory of benefits that is foreseen in the draft merger guidelines. And this goes in hand, in hand of course, with the need to build a rigorous efficiencies case, because the court has reaffirmed the very high threshold for bringing efficiencies. So parties should bring a rigorous case, basis of quantitative evidence, and a possible even contemporaneous document. And last, we do want to warn that these efficiencies might backfire. So in presenting a pro-competitive narrative, narrative parties should be very careful as to not give elements of the commission that can be weaponized against them and their deal. Thank you so much, Amerinist. Dan, two words from you on the implications as an economist, and then I'll end with Chris. Yeah, thank you. It's very hard to add to be a comprehensive insight of Enrique and Ameriolis, but there's a couple of points I'll pick up from an economic perspective. So first on the question of the evidence, the quantitative evidence put forward in the case. That was a centerpiece of the assessment from my point of view in administrative process. It seems to fall in a way somewhat in the court's judgment. There was a crumb of comfort for me that one of my favorite words, Vitiated, which I learnt in the air towards judgment, did come up in this in this judgment regarding the commission's analysis of the quantitative effect. So the bulk of the commission's quantitative analysis was found to be flawed. That led to the conclusion that the increment in accommodation would be indeed the parties argued intensive percent. But then Enrique has said, the judgment goes on to say that it draws a distinction between quantitative and qualitative evidence, and it appears to come down on the side as saying that qualitative evidence can trump quantitative evidence. Now, the position that qualitative evidence can be important could even be decisive. I can see that if there's an absence of quantitative evidence, if something can't be measured, then we have recourse to qualitative evidence. But what about if we have a quantitative evidence? In this case, it was unusual, as I said earlier, in the quality of the quantitative evidence we could bring to bear because the market was already largely operating as it would post-transaction. So if we have good quantitative evidence, do we then need recourse qualitative evidence? What if those two things contradicts one another? What if the qualitative evidence points away from the quantitative evidence? Which do we give precedents to? And one final point in this, I would highlight is that, as Enrique mentioned, the qualitative evidence here is not a separate category of information. The qualitative evidence cited by the judgment is the input to the quantitative assessment. A TVM offered in the administrative process synthesized the various relevant factors of the market's operations and consumer behavior to work out what was the impact of this transaction. The qualitative evidence is simply case of taking those same factors, removing them from that synthesis, and taking impressionistic view of them as a whole. That gives me some cost for concern, if that is going to be the standard from now. Dan, thank you so much. Last word to Chris, assume this remains good law. What are the implications from your perspective? Maybe I'll just close by saying what this might mean outside the digital context. It's obviously yet to be seen how the commission will interpret it, but the judgment's identification of an SIEC based on such a minimal increment in the dominant firms market share is really is worrying. I would say on one hand on maybe the optimistic side for future deals, the court recognizes that strengthening of dominance does not automatically imply an SIEC. While the commission doesn't have to quantify the harm, it does need to explain why a dominant firms market share increasing means that competition will be significantly impeded. Here the court found that bookings hotels market share would increase very little, as we've said, but it relies heavily on the strong network effects of the hotel booking platform. That is, you know, more customers attract more hotels, which in turn attract more customers, and the entry barriers that result from that. In this context, the court says even a small market share increase could further strengthen those network effects. And plus the court notes that the share increment was going to come from flight booking services, which is one of the few hotel customer acquisition channels that booking didn't already dominate. The court, I would say, skates over the important point Enrique mentioned that the basic network effects mechanism actually wouldn't really apply here because almost all hotels were already on booking.com. But in any case, network effects and the other conditions, the court identified don't apply in most industries outside of digital markets. That might give some comfort that the judgment's impact will be relatively contained to the digital space and that it's not a total green light for the commission to block conglomerate mergers based on any strengthening of dominance. The worry is that the court's logic is really not limited to network effects. What is needed to translate a small market share gained by a dominant firm into a significant impediment of effective competition is some qualitative amplification mechanism that allows the commission to explain why the competitive impact exceeds the quantified effect. And one can imagine the commission arguing in the next case that this mechanism is not network effects, but something more generic like scale economies or high switching costs. The commission might say that lots of markets where there's a dominant player already suffer from a low level of competition. And if they read this judgment as saying all that's needed is then for them to explain qualitatively why a deal risks consolidating and perpetuating that state of competition, then we would have here a real expansion of conglomerate effects thinking and one might say a regression of 25 or 30 years. Thank you, Chris. This is clearly a very significant judgment. It's going to be extremely interesting to see how the commission applies it in practice, whether they wait to see if there's an appeal to the Court of Justice. And if there is what the Court of Justice says, as we saw in the aluminum trail case that the Court of Justice can overturn judgments of the general court. And as you've heard today, the panel at least believes that the judgment is vulnerable in all sorts of respects. The thing that's to watch, I think, in the short term is how the commission takes account of the judgment in the merger guidelines, currently at a consultive phase with the commission planning to issue final version of the guidelines at the end of the year. And whether the commission applies the entrenchment ecosystem theory of harm that the Court has endorsed outside of the tech sector. And even within the tech sector, whether the commission maintains as the judgment suggests an effect it can do, that it need not quantify the extent to which a given transaction strengthens a dominant position. So the significance of that strengthening need not be quantified as a matter of law, so the Court has found. Very interesting days ahead. For the time being, though, let me thank today's panel Anita Amarillis, Chris Dan, and Emily Kay. Fascinating discussion of a really interesting case. My name is Nick Levy, and I look forward to welcome you to the next edition of the Clearly Got the Events Trust Review podcast.