Travel agency services are not a thing of the past according to the Estonian Competition Authority
In August 2019, the Estonian Competition Authority (ECA) prohibited a proposed merger between two travel agency services providers in Estonia. The travel agencies argued that their services compete with direct sales by travel services providers and tour operators. Their arguments were rejected by the ECA who defined the relevant markets as the intermediation of travel services to private clients in Estonia and the intermediation of travel services to business clients in Estonia.
The market definitions used by the ECA are in line with the recent practice of the European Commission (see e.g. decision in case M.8862 – GBT / HRG). Similarly to the Commission’s practice, the market investigation conducted by the ECA did not support the view expressed by the merging parties that the line between travel agency services and self-management of business travel is blurred. For business clients, travel agency services are not substitutable with direct bookings with travel services providers. The ECA's approach to leisure travel agency services is also more or less in line with the Commission's practice. The ECA admitted that direct sales may exert some competitive pressure on travel agencies. This competitive pressure was however insufficient to justify a wider relevant market definition.
Interestingly, the ECA did not analyse whether online travel intermediation services belong to the same market with offline travel intermediation services. While the wording of the relevant product market definitions used by the ECA covers both online and offline intermediation, it is apparent from the decision that online travel agency sites, like booking.com, and metasearch sites, like momondo.ee and skyscanner.ee, were silently excluded from the list of competitors. Only traditional travel agencies offering a wide range of travel intermediation services were included in the market. All these travel agencies were companies established in Estonia.
So, it may appear like everyone you know books trips on the Internet without the use of traditional travel agencies but in reality there is a significant number of people and businesses who value and use the services offered by traditional travel agencies. This is good news for most traditional travel agencies but not for the two travel agencies that did not get a permission to merge from the ECA. When only traditional travel agency services were included in the market share calculations, the joint market share reached 60-70% for leisure customers and 40-50% for business customers.