EU General Court Affirms 'Ecosystem' Theory of Harm in Merger Case

The EU's General Court has affirmed the European Commission's 2023 decision to prohibit Booking Holdings' proposed acquisition of Etraveli. The Commission blocked the deal based on a novel "ecosystem" theory of harm, arguing that the merger would allow the already-dominant hotel online travel agent (OTA), Booking, to entrench its position by acquiring a leading flight OTA and cross-selling services to a wider captive audience. This "reverse leveraging," where an acquisition in an adjacent market reinforces dominance in a core market, is not explicitly detailed in current non-horizontal merger guidelines.

The court's validation of this approach is a significant victory for the Commission, signaling a broader interpretation of anticompetitive effects in the digital economy. It suggests that even ordinary commercial practices like cross-selling can be viewed as harmful in a merger context if they entrench a dominant market structure. Companies with strong market positions in one digital sector must now consider the risk that acquisitions in complementary sectors could be blocked on these grounds. Booking has indicated it may appeal to the EU Court of Justice. Meanwhile, the Commission is expected to incorporate ecosystem and entrenchment theories into its forthcoming revised merger guidelines.