Competition Bureau statement regarding the proposed merger between Marriott and Starwood
OTTAWA, May 31, 2016 — On February 19, 2016, the Bureau issued a No Action Letter (NAL) to Marriott International, Inc. (Marriott) and Starwood Hotels & Resorts Worldwide, Inc. (Starwood) indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed acquisition.
This statement summarizes the approachFootnote 1 taken by the Competition Bureau in its review of the proposed merger between Marriott and Starwood, which was originally announced on November 16.
In the course of its review, the Bureau conducted interviews with numerous market participants, including corporate customers, hotel managers, property owners, franchisors, franchisees, licensors and licensees.
Marriott and Starwood are both operators, franchisors and licensors of hotels, resorts and residences worldwide, and Starwood also is the owner of certain hotels in Canada. As at February 2016, Marriott had approximately 129 hotels across Canada operating under numerous brands such as Autograph Collection, Courtyard by Marriott, Delta, Fairfield Inn & Suites, JW Marriott, Marriott Hotels & Resorts, Renaissance, Residence Inn, The Ritz‑Carlton, SpringHill Suites by Marriott and Towneplace Suites. As at February 2016, Starwood had approximately 69 hotels across Canada operating under several brands such as Aloft, Element, Four Points by Sheraton, Le Méridien, Sheraton, W and Westin.
The Bureau started with a general approach to market definition by assessing the nature of overlap in each local market. Potentially overlapping properties were compared to each other and to potential competitors in terms of their amenities (e.g. in‑house restaurant, conference rooms, etc.), location (e.g. proximity to downtown for business travellers), advertised pricing and rankings according to several third‑party ratings providers. The Bureau then refined local market definitions by including or excluding specific properties based on information about substitutability obtained through market contacts.
Barriers to entry by management companies and franchisors were assessed to be high due to the incumbents having established reputations, as well as the long‑term nature of management and franchise agreements. Barriers to entry by property owners were also assessed to be high due to the significant time and cost required to plan, permit, design and construct new locations.
A number of different possible relevant market definitions were assessed, from both a product and geographic market dimension, and under each scenario the Bureau determined that there were sufficient effective remaining competitors in each local market, including chain competitors (e.g. Hilton, Intercontinental, Best Western) and independent hotels, such that the proposed acquisition is unlikely to result in a substantial lessening or prevention of competition.
Based on the presence of a sufficient number of effective remaining competitors in each local market, the Bureau concluded that the transaction is unlikely to result in a substantial lessening or prevention of competition in hotels operating in any local market in Canada.
This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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