Covid-19, kills free competition in tourism



The Covid-19 pandemic will have a snowball effect in terms of its negative cumulative consequences.

One of the sectors that will be the most severely affected is tourism, in all its levels: tour operators, air carriers, cruise, hotels, satellite sectors (restaurants, leisure, touristic shops etc.) and last but not least tourists, as consumers that deserve protection.

As the EU strives to developing a coherent recovery plan for its Member States to go back to normality by preparing the ground for a sustainable post-covid19 growth, Brussels is decidedly silent about how the EU envisages to develop a short and mid-term action plan – a sustainable tourism strategy – for preserving the EU’s tourism industry and putting it in more rational and sustainable foundations, drawing also lessons from the past in terms of its implications on climate, environment, over-tourism and several anchored practices that have anti-competitive and social impacts.

Addressing and rethinking the tourism issues is a must for the EU as many countries of Southern Europe and the Black Sea have economies that are highly reliant on tourism. These countries provide mainly summer tourism destinations for the citizens of Northern and Central Member States within the EU single market, as tourism is mainly under the free supply of services, one of the four EU fundamental freedoms.

But let’s start from the beginning.

Tourism has become a “sui generis” human right accessible to almost any citizen of the globe. Millions of people are flying all around the planet with often low-cost flights or “last minute” schemes that the tour operators are organising at a multinational level and in a more and more vertical manner.

All these flights and the resulting massive tourism – and over tourism in some destinations – have a very high climate and environmental footprint which contributes largely to the climate change and to the degradation of the environment across the planet. There are also studies showing that air pollution can become a vehicle of proliferation of viruses, especially in the case of PM 2,5.

Covid-19 and its proliferation as a global threat  illustrates the causal link between the environment and public health – in a globalised economy where the environment has no borders  – and of course this is a crucial element to take into consideration with the view to promote a new sustainable tourism where quality of life and health are the key elements, while preserving the global environment and the host destinations.

The example of Thomas Cook which has bankrupted last year is very illustrative in this context: A multinational, global tourism operator – holding a dominant position on the market (or sharing a collective dominant position) – operating with low costs and high profit considerations, irrespective of the general interest needs and those of the other actors downstream through the tourism chain.

In 2020 tourism will unfortunately collapse. Nevertheless, this cannot be a reason and an excuse to keep alive the unsustainable tourism schemes of the past and strengthen the existing dominant position of one or two tour operators. Hasty solutions to prepare the 2021 tourism season by asking hotel owners to sign already now contracts, without any increase of prices and without any advance payments pretending that “we are in a force majeure situation and we are trying to save tourism” should not be accepted. This is a “blackmail” attitude of the tour operators which, if hotels do not accept the imposed terms, leads to a refusal to sell the services of the given hotel, a practice that is contrary to any antitrust law worldwide.

The tour operators have built an oligopolistic market of tourism services ranging from the global to the local level: worldwide, in the EU and in several destination Member States, and cities/islands therein, which has become more and more vertical in some national markets. They have their own air carriers, they have purchased hotels, cruise boats, they have their own buses, they have even signed contracts with souvenir shops and other exhibitions in the countries of destination so as to control the whole chain of services without leaving any freedom of choice to the tourist, the consumer and to the intermediaries, i.e. the hotels and the other actors of the chain where the system is not fully vertical.

And on the top of all that they have imposed in a majority of hotels the «all inclusive» concept which strengthens their control on the market and undermines to a large extent other services in the country of destination which the tour operators do not fully control. These behaviours are clearly anticompetitive ones and should be investigated.

The European Commission has exaggerated in a strict application of the state aid rules in a period of economic crisis where state aids could have led to the recovery of the European economy. The “dura lex sed lex” stringent approach of DGCOMP has been applied on a case by case basis on individual projects, notwithstanding their added value and without considering the global picture of the local, national and European economy. Where intracommunity trade is affected if a mayor of a small city wants to build a drinking water plant or a sewerage plant important for the health of their citizens and required by EU law? Why this excessive approach has been followed for state aids and for the sake of which free competition?

And why on the other hand the cartel rules and the abuse of dominant position rules are applied in such a selective – à la carte – manner. Why Articles 101 and 102 of the Treaty on the functioning of the EU have not been applied so far to the tourism sector? Isn’t this a huge market on which an investigation should have been launched by the European Commission?

It is well known to the «insiders» that all types of anticompetitive behaviours are present in this sector. From agreements between tour operators or “concerted practices” to share the markets and fix the prices, as well as the selling conditions of the various packages for each destination. This is one side of the problem, which comes under the rules of Article 101 of the TFEU. The other – under Article 102 – is the abuse of the dominant position which one or two of the mega tour operators hold on the market, expressed either as a single dominant position depending on the market or as a «collective dominant position». A company that has such a position on the market needs to apply fair and non-discriminatory prices and other selling conditions,  and in no case refuse to sell, as it happens if you don’t sign the contracts imposed in practice by the tour operator who dominates, either individually or collectively, the market within which your hotel operates. The abuse of dominant position is expressed through: Abusively low prices, discriminatory prices depending on the hotel and its size and often depending on the banking obligations of the hotel which for reasons of survival accepts anything to survive, and of course exploitation of the smaller hotels which have a very weak negotiating position. The “relevant market” as a legal prerequisite is also here very clear and can be defined in several circles: the “product market” are services of the tour operators in terms of flights and services for full or restricted packages, including accommodation and other services. The « geographical market» is defined as the market of all the touristic destinations where the tour operators operate, which are mainly the Southern, Mediterranean and Black Sea Member States of the EU collectively, but also individually because of the high numbers of tourists and turnover in each of them.

All types of anticompetitive behaviours are here present, and it is really strange why the European Commission has not investigated this market so far. Would a complaint to the European Ombudsman trigger such an investigation or a resolution of the EP?

One should have expected the European Commission, as the Guardian of the Treaties, to launch ex officio an investigation for such an important sector where the interests at stake are huge.

This issue needs to be followed up closely, as the pandemic will most likely lead to even more serious anticompetitive behaviours in the tourism sector.

The post-Covid19 era which is still not visible at the end of the tunnel should lead us to rethink a lot of stereotypes and anchored practices, in the light of the general interest and of the Sustainable development goals of the UN with the view to promoting a sustainable and circular economy driven tourism.

LO MÁS LEÍDO

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