By a 3-2 vote, the Federal Trade Commission today closed its 10-month investigations of two proposed transactions in the cruise industry - the friendly creation of a "dual-listed company" combining Royal Caribbean Cruises, Ltd. (RCCL) and P&O Princess Cruises plc (Princess), and the competing hostile tender offer by Carnival Corporation (Carnival) for Princess. The Commission's vote follows review and clearance by several other antitrust enforcement agencies, including those of the European Union and United Kingdom, and allows both transactions to proceed without challenge by the FTC.
The issues presented by these two transactions are highly complex and the ultimate decision depended on a close analysis of industry-specific facts. Because of the importance of explaining the Commission's decisions, with due regard to confidentiality concerns, and in view of unusually extensive media coverage, the Commission has issued a detailed explanation of its decision.
Describing the investigations, the Commission statement details work done to analyze voluminous documents, interviews conducted, and consultations provided by third-party sources. It also stresses the importance of the extensive empirical analyses of quantitative data on prices, bookings, ship deployments, and the financial characteristics of the industry and the parties. The Commission concluded that this highly fact-specific analysis of the data demonstrated that the proposed transactions will not adversely affect consumers.
The statement, which is available as a link to this press release on the FTC's Web site, provides an overview of the cruise industry, an analysis of the relevant product and geographic market, and a detailed assessment of the likely competitive effects of each transaction.
In concluding, the Commission notes, "This investigation provides a compelling illustration of the principle that our review of mergers is intensely fact-specific, driven by the dynamics of the relevant industry and the impact of the specific transaction under review. After an extensive investigation, we have concluded, as did our counterparts in Europe . . . that the facts do not warrant enforcement action."
Commissioners Sheila F. Anthony and Mozelle W. Thompson respectfully dissented from the majority's decision to permit the transactions to proceed. In their joint statement, they explained that, "We did not join the majority because we believe that there is a substantial likelihood that either merger will significantly lessen competition in violation of the Clayton and FTC Acts, and that this risk must be assessed in the context of a full trial on the merits." The two further explained that the extremely high post-merger concentration levels in the North American cruise market gave rise to a presumption that either merger was likely to facilitate the exercise of market power to the detriment of consumers, and that the parties and evidence had failed to sufficiently rebut this presumption.
The dissenting Commissioners described the possible anticompetitive effects that either merger could cause and stressed that coordinated interaction on price and capacity issues was of particular concern. They were also unconvinced that entry by new players or expansion by the smaller players in the cruise market was likely to thwart these potential effects. Commissioners Anthony and Thompson concluded their statement by noting that "[t]his was a difficult decision, guided as always by our clearest judgment as to what best protects the interests of American consumers."