INQUIRY INTO THE PROPOSED MERGER OF P&O PRINCESS CRUISES PLC (POPC) AND ROYAL CARIBBEAN CRUISES LTD (RCCL)

• Is the UK the relevant market in all cases, or is the market different for some cruises and/or other services?
• Is there a single market (or a distinct segment of a market) for cruises and/or other services – in terms of geography, customers or for any other reason - or are there several distinct markets, or are cruises part of a larger market?
• Is there scope for substitution at the boundaries of any of the markets that might be identified?
• If so, is that substitutability affected by national, geographical, seasonal, or other, considerations?

b) Whether the proposed merger is likely to affect competition in any of the markets identified in the UK, and, in particular:

• Is it likely to lead ultimately to a significant rise in prices, or to a reduction in quality or levels of service, for customers, travel agents or any other parties?
• Can we expect any undesirable practices to come into existence or be exacerbated as a result of the proposed merger – such as collusion or co-ordination over pricing; price discrimination; predatory pricing; or cruise lines forcing customers to pay for extra services: such as flights to launch destinations or a minimum number of shore trips?
• Will other cruise lines, or other participants in the holiday or travel sectors who provide services to customers in the UK, be seriously weakened as a result of the market conditions created by the proposed merger?
• Are there significant barriers to entry or expansion in the relevant markets, such as:
• the costs involved in establishing and promoting new cruise lines and/or destinations?
• the ‘grand fathering’ of licences and/or rights to departure berths or destinations?
• the costs involved in transporting customers to and from departure locations?
• economies of scale, e.g. advantages in operating large ships, providing a wide range of destinations and a large variety of cruises and/or other services, in purchasing fuel and other supplies, in securing air transportation for passengers, or in establishing a distribution network? or
• is there an expectation that existing firms will respond aggressively to new entry or expansion, for example, by cutting prices or increasing travel agents’ commissions on cruises in the region where a new entrant begins operating?
• Are there identifiable trends in the development of the market that might be affected by the proposed merger?
• Are there any features of the market – such as links between cruise lines and travel agents (which might, for example limit the extent to which the brochures of rivals are displayed) or between cruise lines and port authorities, or a lack of transparent pricing – that restrict competition?
• Could any other aspects of the proposed merger be expected to be to the detriment of customers, competitors and/or other participants in the holiday or travel sectors?
• If there were to be any potentially unwelcome consequences of the proposed merger, might they be constrained sufficiently to avoid detriment to the public interest:
• by customers or travel agents having sufficient buyer power, or
• by their ability to find alternative sources of supply in the UK or abroad?

c) Whether there are likely to be benefits to the public interest from the proposed merger; if so:

• what are they likely to be?
• and to whom will they accrue?

d) In the event of the Commission finding that the proposed acquisition was expected to operate against the public interest, what remedies, behavioural or structural, would be appropriate to deal with the adverse effects identified:

• a complete ban on the proposed merger taking place or
• the proposed merger being conditional on a complete divestment of one or more of the merged entity’s cruise lines operating in these markets, or a partial divestment of ships and/or of rights or licences relating to specific cruises or geographical areas where adverse effects may be identified
• a divestment of any part of the merged entity’s businesses, assets or other elements; or the breaking up of any connections at the corporate level
• an undertaking to make transparent to customers and travel agents that P&O, Royal Caribbean and their associated cruise lines will be part of the same group, and no longer in competition with each other
• undertakings relating to the UK operations of the merged entity about the prices of cruises and/or other services, and the levels of commissions paid? These could take a number of forms, could be imposed for varying periods of time, and could be adjusted for changes in the RPI or other relevant indices;
• any other remedies?

Notes to Editors

1. The reference was made by the Secretary of State for Trade and Industry, under sections 64, 69(2) and 75 of the Fair Trading Act 1973, on 29 January 2002 (see DTI news release P/2002/055).
2. No conclusion will be reached about whether any matters operate or may be expected to operate against the public interest until the Competition Commission submits its report to the Secretary of State on 20 May 2002. It will subsequently be published.
3. This inquiry is being undertaken by a group of five Commission members and is led by Denise Kingsmill, one of the Commission’s two deputy chairmen. The other members are Anthony Clothier, an independent consultant, and former Director of C&J Clark Ltd, Peter Hazell, Chairman of the Argent Group, Paul Klemperer, Edgeworth Professor of Economics at Oxford University, and Jeremy Seddon, former Vice-Chairman of BZW Corporate Finance.
4. Further information can be obtained from the Commission's website at www.competition-commission.org.uk
5. Enquiries should be directed to Francis Royle, Press Officer (020 7271 0242).