Two thumbs down for mergers: the American Antitrust Institute, a Washington, D.C.-based think tank, and the National Consumers League, a consumer rights organization, have jointly petitioned the Federal Trade Commission to deny both outstanding cruise line merger proposals. Neither deal -- Carnival and P&O Princess, Royal Caribbean & P&O Princess -- positively serves the consumer and the marketplace, the two groups said in a letter to the FTC.
According to a statement, Linda Golodner, President of the National Consumers League, said, "Thousands of consumers, especially retirees on fixed incomes, depend on effective, vigorous competition in the cruise industry to assure quality service and a fair price. The NCL urges the Federal Trade Commission to oppose the proposed mergers."
The letter sent to the FTC follows a study conducted by the American Antitrust Institute that looked at both deals from many angles. In a nutshell, their primary objections to both mergers:
*Restricting competition, particularly in North America which is considered the world wide cruise passenger (and industry) hub.
*Ultimately, less competition would result in rising prices.
One of the more interesting issues the study raises is in the actual definition of the market in which these cruise lines compete. Rather than focusing on actual cruise competitors, a fairly small industry, they are proposing that the real marketplace in which cruise lines angle for customers is the entire vacation industry (including, for instance, resorts and theme-type destinations such as Las Vegas or Disney World). Says Diana Moss, an economist and a member of the Institute’s research team, "market definition is the crucial antitrust issue presented by these mergers. Once we concluded that the relevant market is cruise vacations in North America rather than something broader, such as all vacations, it was very clear that either of the proposed combinations would significantly increase market concentration beyond the thresholds set forth in the Department of Justice/Federal Trade Commission 1992 Horizontal Merger Guidelines, and that either would present a substantial risk of anti competitive effects."
A regulatory status report shows that Royal Caribbean’s merger with P&O Princess has received clearance from European and United Kingdom regulators; Carnival’s waiting to hear from the European Commission about approval for its bid. But it’s widely known that the most important regulatory approval will come from America’s FTC, which hasn’t ruled in either case. That announcement is expected in mid-August.
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Antitrust Group Rejects Mergers
July 10, 2002