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A few days after a U.S. federal court refused to stand in the way of Sabre’s pending $360 million acquisition of rival Farelogix, the UK Competition and Markets Authority blocked the merger on the grounds that it would stifle innovation and competition.

“We recognise that our decision in this inquiry comes at a time of uncertainty and disruption in the global travel industry due to the COVID-19 pandemic,” said Martin Coleman, chair of the UK competition body’s inquiry group in a statement. “It remains important that we protect competition among businesses that provide services to airlines and the benefits such competition can bring for airlines and passengers. We never take decisions to block mergers lightly and in this case the evidence of harm is clear.”

A Sabre spokesperson, responding to the ruling, said the company would mull its next steps.

“We are disappointed by the CMA’s findings, particularly in light of the U.S. federal court’s ruling, which found that Sabre’s acquisition of Farelogix is not anti-competitive and should not be prohibited,” the Sabre spokeswoman said. “We are reviewing the CMA’s findings and will carefully consider our options.”

Before the April 7 decision in the United States, Sabre’s legal team had pressed the federal court in Delaware to hasten a decision on the competition litigation between Sabre and the U.S. Department of Justice because the UK decision was due this week. Sabre argued — incorrectly, it turns out — that the UK would be unlikely to go against a U.S. court decision favorable to Sabre, especially because Farelogix’s business is relatively small in the UK.

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The UK’s competition authority looked at the issue from a different lens than the U.S. Department of Justice, which opposed the merger as anticompetitive, and the U.S. federal court in part because the UK body gauged the impact for UK consumers alone.

The UK markets authority found that Sabre’s proposed acquisition of Farelogix would reduce competition because both companies are investing heavily in developing airline ancillary services for distribution to travel agencies, and Sabre would be unlikely to continue to develop its own solutions if the deal goes through. These optional services for airline passengers include the ability to purchase in advance seats with extra legroom, Wi-Fi, and meals, for example.

“Following its in-depth “Phase 2” investigation, the Competition and Markets Authority (CMA) has found that Sabre’s purchase of Farelogix could result in less innovation in their services, leading to fewer new features that may be released more slowly,” the UK competition authority stated. “Fees for certain products might also go up. As a result, airlines, travel agents and UK passengers would be worse off.”

The UK competition authority found that “airlines, and ultimately their passengers, will lose out from both this lack of innovation and the insufficient competition between the remaining companies in the market.”

In addition to developing airline ancillary service solutions for third-party distribution, both Sabre and Farelogix provide connectivity for travel agencies, including large travel management companies. The UK competition body found that Farelogix provides airlines with an attractive connectivity alternative to Sabre.

“The CMA considers that Farelogix’s continued independence will likely help motivate Sabre to innovate further, giving airlines more choices in connecting to travel agents that will allow tickets and extra products to be sold through travel agents in more innovative ways,” the authority stated.

The UK ruling leaves Sabre’s proposed acquisition of Farelogix hanging with its fate a question mark. The U.S. Justice Department still has the option of appealing the adverse April 7 ruling by the U.S. District Court of Delaware.

In reaction to the Delaware ruling, Assistant Attorney General Makan Delrahim said Wednesday: “”At trial, the Antitrust Division argued that Sabre’s acquisition of Farelogix would extinguish a crucial constraint on Sabre’s market power and would result in higher prices and less innovation. While we are disappointed with the court’s decision, we appreciate the court’s thoughtful consideration of this important case. We will closely review the court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of the American consumer.”

It likely that Sabre will enter into additional dialogue with the UK Competition and Markets Authority, or mull new litigation.

Some had argued prior to these developments in the United States and United Kingdom that given the duress that the entire travel industry, including Sabre and Farelogix, faces because of the coronavirus pandemic that perhaps Sabre would back out of the merger. That remains a possibility, although there have no such signals to date that Sabre’s taste for the acquisition has soured.

Note: This story has been updated to include a statement about the U.S. Justice Department about the adverse decision in the Delaware federal court.

Photo Credit: A couple in coach class on Hawaiian Airlines. A UK regulatory body blocked the Sabre-Farelogix merger on the basis of it hurting innovation for travel agencies seeking to offer extra legroom seats, meals and Wi-Fi to airline passengers. Rae Huo / Hawaiian Airlines