CMA phase 2 investigation raises competition concerns in Amex GBT-CWT merger

American Express Global Business Travel’s planned acquisition of CWT has the potential to “substantially lessen competition” and may lead to “reduced choice and quality, and higher prices for customers”, according to the UK’s Competition and Markets Authority (CMA) which published an interim report on Wednesday as part of its ‘phase 2’ investigation following the launch of a merger inquiry in June.

The CMA said in a statement that Amex GBT and CWT compete “closely” for global multinational customers and that the merged business “would be, by far, the largest supplier in the market, with the second largest player around half the size of the merged business, and the remaining competitors less credible options for customers”.

The independent group said it came to the above conclusion after reviewing evidence such as share of supply estimates, bidding data, the companies’ internal documents and information from customers and competitors.

CMA chair Martin Coleman said: “Despite the increased use of video conferencing, business travel continues to be a necessary component for effectively doing business for many companies and a major area of expenditure.

“We have provisionally found that only a small number of business travel agencies are considered capable of meeting the needs of the largest companies and this deal could reduce competition and increase costs.”

These latest findings echo previous competition concerns following the CMA’s phase 1 inquiry into the $570 million deal, which is also under review by the US Department of Justice.

Amex GBT, however, has expressly disputed the CMA’s interim findings. In a statement on Wednesday the TMC said it “fundamentally disagrees” with the assessment and that it will “continue to work collaboratively” with the CMA as well as other regulators to demonstrate that the transaction “should be approved”.

The company added that the interim report “does not reflect the evidence presented on the highly competitive and dynamic nature of the business travel sector. Instead, the CMA has erroneously focused on a narrow segment that makes up a small fraction of business travel spend. The CMA has ignored multiple sources of evidence that show clearly that Amex GBT consistently competes for all customers, including the largest global customers, with numerous other travel management companies that operate globally”.

The statement continued: “Amex GBT will respond to the interim report to correct several errors and misconceptions about how the business travel sector operates and to demonstrate that the CWT acquisition will not harm competition in the UK or elsewhere.”

Amex GBT chief legal officer and global head of M&A, Eric J. Bock, added: “We are disappointed by the CMA’s interim report. The CMA has not appreciated the evidence that reflects the breadth of the business travel industry and its dynamic and competitive nature. In recent years, numerous travel management companies have expanded their offerings while other companies have entered the industry and are rapidly growing their businesses.

“We are reviewing the interim report closely and will be responding to the CMA’s concerns. We firmly believe that the proposed transaction would result in many customer and supplier benefits and that the business travel industry would remain highly competitive. We will be engaging further with the CMA to demonstrate why its concerns are not justified,” he said in a statement.

Amex GBT said it continues to expect the transaction to close in the first quarter of 2025.

Interested parties have until 27 November 2024 to respond to the CMA’s phase 2 interim report. The Amex GBT-CWT merger is the first to be reviewed under the UK’s new phase 2 investigation process, which was introduced in April to enable greater market and stakeholder engagement, according to the CMA. This phase of the investigation expected to close by 26 January 2025.