Article 2
This Decision is addressed to: Carnival Corporation Carnival Place 3655 NW 87 Avenue Miami, Florida 33178 USA. Done at Brussels, 24 July 2002. For the Commission Mario Monti Member of the Commission (1) OJ L 395, 30.12.1989, p. 1; corrigendum OJ L 257, 21.9.1990, p. 13. (2) OJ L 180, 9.7.1997, p. 1. (3) OJ C 233, 30.9.2003. (4) OJ C 233, 30.9.2003. (5) The term "the Parties" is used for drafting convenience: it does not support that the Parties dealt jointly with the Commission. (6) Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission notice on the calculation of turnover (OJ C 66, 2.3.1998, p. 25). To the extent that figures include turnover for the period before 1 January 1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis. (7) Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk. (8) As far as POPC's German subsidiary is concerned it also related to the provision of river cruises. (9) Figure refers to number of passengers cruising per year in relation to total population. (G.P. Wild: Fleet Changes, p. 56). (10) OJ C 204, 28.7.1993, recital 19.5. (11) [Reference to POPC's submission]*. (12) The Commission has, however, been unable to gather data that would enable it to perform any quantitative tests on the boundaries of the relevant market. When such data is available empirical tests such as the SSNIP test can be done to try to establish how customers would react to a change in relative prices of the products in question. SSNIP stands for "small but significant non-transitory increase in price". (13) In line with common industry assumptions the term "cruises" will only be applied to multi-night maritime or river journeys for leisure purposes. (14) See G.P. Wild (International) Limited: Maritime Tourism Competing in a World Market, September 2000, p. 71. (15) [Reference to POPC's submission] *. (16) [Reference to POPC's submission] *. (17) IRN Research, investigation of cruises in the United Kingdom holiday market, April 2002. (18) Mintel Consultancy, a report on the United Kingdom cruise sector, 10 April 2002. (19) Given the small sample sizes involved, IRN subsequently confirmed that the "true" value of this estimate could be between 50 % and 80 %. (20) Report of a second survey RCCL had commissioned from Conquest Research, submitted 8 July 2002. (21) The researchers achieved over 1000 interviews with respondents and claim that the sample was highly representative. (22) This figure relates specifically to the Nationwide Tracking Survey undertaken for Holland America Line, June 2000. (23) The Mintel Group: All Inclusive Holidays, Leisure Intelligence, August 2001, p. 8. (24) These categories represent social grade, social grade is the socio-economic classification used by the market research and marketing industries in the United Kingdom, most often in the analysis of spending habits and consumer attitudes. The social grade categories are defined as: A - professional (non-manual); B - middle managers (non-manual); C1 - all other non-manual workers; C2 - all skilled manual workers; D - all semi-skilled and unskilled manual workers and E - on benefit/unemployed. (25) Cruise Information Service, Passenger Shipping Association, Annual Cruise Review 2000 (United Kingdom and Europe), p. 9. (26) The NOP Holiday Survey, 1999 by NOP Research Group Limited. (27) [Reference to the POPC-commissioned study] *. (28) Passenger Shipping Association/Cruise Information Service: Turning the Tide; May 2002. (29) NERA Economic Consulting "POPC/RCCL - Analysis of cruise yields and capacity by Destination", 2 April 2002. (30) Yields in this study have been defined as the (weighted) average of achieved ticketed revenue per passenger bed days across all POPC's cruises departing to a given destination during the particular month. (31) NERA Economic Consulting "POPC/RCCL - Analysis of cruise yields and capacity by destination", 2 April 2002, page 12. (32) Margaret E. Guerin-Calvert and Janusz Ordover "Profits and prices in evaluation of capacity expansion", dated 27 June 2002. (33) The authors obtained revenue and cost data at ship level for 1995 to 2001 for Carnival Cruise Lines. Two profit measures were presented: gross profits (revenues obtained from cruise passengers minus the cost of sales) and gross operating profits which also deducted the costs of operating expenses. (34) The Ordover paper, section II. (35) On this point a competitor has provided evidence on service levels (measured by staff numbers) differing considerably on the same ship before and after being converted to a TOC product. Staffing was reduced by 18 %. (36) This information was also submitted to the United Kingdom Competition Commission and forms part of its report. It is, however, not publicly accessible. (37) Response of 26 June 2002, the Cruise line and tour operator figures are positively correlated with a coefficient of more than 0,9. (38) [Reference to POPC's submission] *. (39) [Reference to POPC's submission] *. (40) It is of course possible that two products with very different prices are in competition with each other. However, given the similarities between the essential nature of premium cruises and economy cruises, the closer the prices, the more likely it is that there is a direct competitive relationship between the two segments. (41) Mainly seven- and 14-day cruise products, mixed with 10-, 12- and 16-day cruise options. (42) Mediterranean/Scandinavian cruises with Caribbean cruises. (43) This survey also includes prices quoted by POPC. (44) The survey covered three premium (four-star) products and four tour operator cruise offerings by all three major United Kingdom tour operators. (Festival's European Stars, Costa Victoria, RCI's Splendour of the Seas; Airtours' Carousel and Sunbird Thomson's Topaz and Island Cruise's Island Escape). Rates are those quoted by cruise lines reservations on 13 March 2002. The Commission notes, however, that the most important United Kingdom supplier of premium cruises, P& O Cruises, is not contained in the premium sample as they did not offer comparable cruises. (45) This sample included one P& O Cruises cruise (on the Oriana), one RCI cruise (on the Explorer of the Seas) and one Airtours cruise (on the Sundream). (46) Equalised for tipping costs, the difference is 57 %. (47) See Travel and Tourism Intelligence, World Cruise Market 2001. (48) DRV: Der Kreuzfahrtenmarkt Deutschland 2001, p. 13. (49) These figures refer to Germany, in which the riverine cruise market is particularly developed. See Alf Pollak, Gaby Pollak-Lenke, The German Cruise Market, Census 2000, February 2001, p. 18ff. (50) The website of this company states in an information on their product for German tourists: "Bitte bedenken Sie: Es handelt sich nicht um eine Kreuzfahrt" (Please consider that this is not a cruise), http://www.hurtigruten.de/html/ frame1.htm.26. (51) See also Table 10, where the overlap in PCDs for Spain is stated as < 1 % in 2001. (52) See Passenger Shipping Association (PSA): Annual Cruise Market Digest United Kingdom (Europe) 2000, p. 32; G.P. Wild (International) Limited: Maritime Tourism Competing in a World Market, September 2000, p. 26; and estimates given by Carnival, Annex 7.2.3 of form CO. (53) G.P. Wild (International) Limited: Maritime Tourism Competing in a World Market, September 2000, p. 27. (54) The naming of the style should not be confused with the itinerary. Such cruises may also have a Caribbean or Northern European itinerary. (55) Douglas Ward: Berlitz - Complete Guide to Cruising & Cruise Ships 2002, Princeton 2002. The guide's ratings are based on the familiar system of one to five stars complemented by attributions, or not, of a "plus" (+) qualification that indicates a somewhat higher position of a certain product in the eyes of the rating agent. The Berlitz guide arrives at its ratings by allocating a certain number of points to five aspects of each cruise product: the ship (25 %), accommodation (15 %), cuisine (15 %), service (20 %) and cruise experience (25 %). The basic units of these ratings are individual ships. (56) As to decisions in the hotels sector see Case No IV/M.1133 - Bass plc/Saison Holdings BV; Case No IV/M.1596 - Accor/Colony/Blackstone/Vivendi; Case No COMP/M.2197 - Hilton/Accor/Forte/Travel Services JV. Decisions in consumer goods sectors: Case No COMP/M.2544 - Masterfoods/Royal Canin; Case No COMP/M.2569 - Interbrew/Beck's, Case No IV/M.794 - Coca Cola/Amalgamated Beverages; Case No IV/M. 623 - Kimberly-Clark/Scott. (57) G.P. Wild: Maritime Tourism, pp. 73 and 57. (58) Cunard will add to its fleet the "Queen Mary 2", the world's biggest and most expensive ship, in 2003. Another ship, the [...] * will only be added in 2005 and was not considered in this projection. [...]* capacity will further add capacity even at the assumption of a simultaneous retirement of the Caronia, as the [...]* capacity by far surpasses Caronia's capacity. [...] *. (59) For POPC the following capacity changes were considered: intra-company transfers from Princess: Oceana, ex-Sea Princess; transfer to Ocean Village: Arcadia. For Princess: addition of newbuilds: Coral Princess, Star Princess, Diamond Princess, Island Princess, Sapphire Princess, Crown Princess (II); intro-company transfers to other brands or retirements: Ocean Princess, Pacific Princess, Regal Princess, Crown Princess (I), Sea Princess. For Swan Hellenic: replacement of Minerva (I) by Minerva (II)..33. (60) The total of the figures goes beyond 100 % because some respondents understood the third group to be overlapping with the first two, others understood the three groups to be complementary. (61) [...] *. (62) Conquest Research: Report on telephone interviews conducted among cruise guests in the United Kingdom, 16 May 2002, p. 5f. The report was commissioned by Royal Caribbean. Respondents were asked to say which cruise line they would have chosen instead of the one they actually travelled with last time. Quite a high percentage (49 %) of respondents chose none of the alternative lines, which is consistent with a high level of loyalty to the line selected on the last occasion. The table excludes those who said they would not choose an alternative. (63) Conquest Research: Report on telephone interviews conducted among cruise guests in the United Kingdom, 16 May 2002, p. 6 ff. (64) [...] *. (65) [...] *. (66) [...] *. (67) [...] *. (68) G.P. Wild (International) Limited, Implications of fleet changes for cruise market prospects to 2010, August 2001 and UBS Warburg Global Equity Research, It's high tide you looked at the Cruise Lines, 19 March 2002. (69) In winter somewhat less as Airtours charters one of its ships only in summer. (70) As with Airtours one ship is not chartered during the winter season. (71) [Reference to POPC's submission] *. (72) Reply to the Commission's questionnaire of 25 June, page 18. Figures derived from Annex 24.1 [...] *. (73) Carnival's reply to the Commission's questionnaire dated 25 June, pp. 15 and 18. (74) According to G.P. Wild, the Parties accounted for 52 % of new-build orders at the end of 2000 (Carnival 32 %, POPC: 20 %), G. P. Wild: Maritime Tourism, page 42. (75) [UBS Warburg Global Equity Research It's high tide you looked at the Cruise Lines, 19 March 2002] *. (76) Hurtigruten share is stated as 5,1 %. See recitals 107 and 108. In Table 9 Hurtigruten's shares are not included, in line with the proposed market definition. (77) DRV: Der Kreuzfahrtenmarkt Deutschland 2001, Eine Studie von Alf Pollak und Gaby Pollak-Lenke, im Auftrag des Deutschen Reisebüro und Reiseveranstalterverbandes e.V. The DRV figures include Norwegian Coastal Voyages/Hurtigruten, for which an allowance of 7 % was made. (78) This is minus the estimated share for Hurtigruten which is excluded from the Commission's market definition but included in the DRV figures. The (passenger) market share for Norwegian Coastal Voyages/Hurtigruten was estimated to be 5 % by Carnival in its estimate on 2000. These 5 % were deducted from the DRV market volume. (79) Crystal, Radisson Seven Seas, Silver Sea, Sun Bay and Compagnie des Iles de Ponant. (80) African SafariiClub, Quark, ADAC, Club Valtur, American Classic Voyages. (81) This may be due both to these companies' no-discounting policy and to the fact that Hapag Lloyd and Peter Deilmann have a number of ships that are either luxury or upper premium and therefore are also higher value. (82) Carnival, in its submission "An Assessment of the EC Commission's Article 6(1)(c) decision" of 14 May 2002 comments on this demand forecast and underlines that the figure of 8 % only reflects a low growth forecast, described by G.P. Wild as "conservative, even pessimistic". Carnival's submission adds G.P. Wild's medium and high growth forecasts, which, if applied to Germany (as is presented as a realistic possibility in Carnival's submission), arrive at growth figures of around 25 % yearly for German demand (i.e. total German demand increases from 2001 to 2004 of 100 % and 156 % respectively). (83) [...] *. (84) This is notwithstanding the arguments in recital 238. (85) See Table 9 "German nationals": [30 to 40 %] * plus POPC Aida and Arkona: [10 to 20 %] *. (86) One could expect this growth to materialise to a larger extent with "American" destinations such as Alaska, Hawaii, Mexican Riviera, Caribbean, Barbados and New England. (87) In DRV: der Kreuzfahrtenmarkt Deutschland 2001, "upper premium" is termed "premium" whereas "lower premium" is termed "standard". The understanding of "premium" in this decision therefore covers the DRV categories "premium" and "standard". This survey gives the following price per diem ranges (in DEM, EUR in brackets): Budget: DEM 150 to 249 (77 to 127); Standard DEM 250 to 349 (128 to 178); Premium DEM 350 to 499 (179 to 255); de Luxe above DEM 500 (256). Ibid. p. 13. (88) By contrast, economy cruises can attract a large number of mainly first-time cruisers but will only have small margins and luxury cruises have high margins but can appeal only to a small group of customers. (89) DRV: Der Kreuzfahrtenmarkt Deutschland 2001, p. 13. (90) Ibid. p. 13. The boundaries between luxury and upper premium may sometimes be blurred. (91) For Cunard, however, only Queen Elizabeth II's Queen's Grill and suites. (92) DRV: 68 % composed of 23 % upper premium (Premium) and 45 % lower premium (Standard). Ibid. p. 13. (93) The ship is now chartered by Transocean Tours. (94) Not infrequently they operate even above as "upper berths", i.e. the third or fourth beds per cabin, are not taken into account for measuring 100 % capacity utilisation. (95) PCD growth rates are slightly lower as the average length of cruises is sinking slowly. (96) As RCCL's market share in Germany remains below 5 % and as RCCL has no German-style brand, nor even a European-style brand, Carnival's and RCCL's positions in Germany are not comparable. (97) The Commission has no information going beyond that date. See DRV: Der Kreuzfahrtenmarkt Deutschland 1994, im Auftrag des Deutschen Reisebüroverband durchgeführt von Alf Pollak., p. 6. CCL, Princess, HAL (market shares in 2001 < 1 %) were represented by a general sales agent. (98) The charter of another ship ended in 1998. (99) Carnival's reply to the Commission's questionnaire dated 25 June, p. 22. (100) The German association of tour operators and travel agents counts 4270 members and states that they would account for three-quarters of the turnover of this sector. (DRV: Fakten und Zahlen zum deutschen Reisemarkt, März 2002). Only six tour operators account for more than 80 % of the tour operator market. A cruise company states, "The German travel agents market consists of about 22000 travel agencies, most of them belonging to cooperations. Only one third of those travel agencies are so-called free agencies which are choosing the products on their own". (101) Data provided, for the year 2000, by the United Kingdom Consumers' Association. (102) There is some discrepancy of these market shares with those estimated by Carnival (see Table 6). Some of the discrepancy may be due to the absence of direct comparability of passenger and PCD market shares. Some of it may be due to changes between 2000 and 2001. E.g. Carnival's lower market share in Spain in 2001, may be due to increased competition by national economy operators. On both assumptions of market shares for Carnival the main argument concerning POPC's position remains unchanged. (103) [Reference to POPC's submission] *. (104) According to press information, Festival has completed negotiations to secure a relevant package of extra funding (private placement of share capital and bond financing) in order to consolidate its financial strength with a view to widen the company's shareholding base and to expand its fleet. Furthermore, Festival's chairman and CEO has stated that record bookings in the first months of this year will allow to consider 2002 as Festival's "best-ever year". (105) The following shipyards produce large cruise ships: Chantiers de l'Atlantique (France), Meyer Werft (Germany), Fincantieri (Italy), Kvaerner-Masa (Finland) and Aker MTW Werft (Germany). Lloyd-Werft (Germany) does not produce whole ships but only completes bought-in hulls, as does Mariotti (Italy). (106) Chantiers de l'Atlantique and Fincantieri produce other types of ships such as naval vessels, ferries, gas tankers and submarines, respectively. Kvaerner Masa-Yards produces gas tankers, Meyerwerft produces gas tankers and ferries and Aker MTW Werft produces, among other things, containerships.