Merger between firms J3 and Bus Serviços is cleared subject to remedies

On 26 January 2022, the Administrative Council for Economic Defense (CADE) cleared the merger between the firms J3 Operadora and Bus Serviços de Agendamento subject to the execution of a merger control agreement. The approval was contingent on a merger control agreement signed with CADE.

According to the rapporteur of the case, commissioner Sérgio Ravagnani, before the transaction, the firm Bus Serviços operated exclusively as an online travel agency (OTA) specialised in selling bus travel tickets, under the name ClickBus.

The other company, J3 Operadora, operated as a business intermediary between bus travel companies and digital marketplaces. Its activities included signing agreements with bus companies to sell their tickets in several online sales channels, particularly in OTAs such as Clickbus.

The service that integrates bus travel company's systems with OTA websites is known as global distribution system (GDS). The system enables OTA's access to fleet data from different bus companies, whilst allowing for bus companies to broaden their online sales channels.

 Merger review

Upon the deal consummation, Bus Serviços started operating in three markets, namely the road passenger transport (by origin-destination routes); the integration of bus travel companies' fleets with OTAs; and bus ticket sales on OTA websites.

The case review pointed out to a potential market foreclosure by the company Bus Serviços. There were concerns that the merger would create incentives for Bus Serviços to provide bus fleet information to ClickBus only, harming the development of GDS services and competing OTAs.

The rapporteur mentioned Bus Serviços' policy of exclusivity with OTAs and bus companies as another point of concern. This is because the policy limits partnership options for rivals – whether entrants or established companies – directly affecting their ability to challenge the market power of the merged firm.

Therefore, CADE imposed on Bus Serviços a merger control agreement to mitigate these issues. Through the agreement, the company undertakes not to require or sign any contracts with exclusivity clauses with companies hiring their GDS and ticket sales services in the ClickBus platform, whether bus companies or OTAs.

Additionally, within 60 day of the signing, Bus Serviços must formally inform companies that hired their GDS services with exclusivity agreements that they are now exempt from the exclusivity clause.

"We hope that by taking out the exclusivity clauses we facilitate entry into the GDS and OTA markets. Moreover, we expect entrant and established companies to be less dependent on Bus Serviços' GDS services and thus be able to challenge the merged company's market power", said Ravagnani.

The merger control agreement also provides that the merged firm should not discriminate amongst companies or refuse to deal with them, nor should it use competitively sensitive information from competing OTAs that purchase its GDS services. Moreover, the firm committed to implementing an antitrust compliance programme.

Notification

The Office of the Superintendent General identified the transaction between Bus Serviços and J3 Operadora in the scope of Administrative Enquiry no. 08700.004318/2018-11. The enquiry investigated the alleged anticompetitive practice in the market of bus ticket online sales.

The transaction started in 2015 and was consummated in 2016. However, the merging companies only notified CADE in September 2020, after the authority initiated a procedure to investigate them for gun jumping, i.e. completing a merger or acquisition of mandatory notification before receiving clearance from the authority. The case is now pending before the Office of the Superintendent General.

Access Case no. 08700.004426/2020-17.