The FCCA approves Scandic’s acquisition of Restel, with conditions

Today, the FCCA has approved the acquisition of Restel Hotellit Oy by Scandic Hotels Oy, with conditions. As a condition for the approval of the sale, the FCCA obliged Scandic to sell one hotel in Pori, Lahti and Kuopio to its competitors. In addition, Scandic has undertaken not to acquire two new hotels planned for Lappeenranta and two planned for Vantaa.

Scandic and Restel are engaged in the hotel accommodation business in Finland. There are a total of 24 Scandic hotels in Finland in 17 cities. Scandic also operates three Hilton hotels in Finland under a franchising contract. As for Restel, it operates a total of 43 hotels: in addition to the company’s own hotel chain, Cumulus City & Resort, the company operates the Holiday Inn hotels in Finland as well as Helsinki’s Crowne Plaza, Indigo Helsinki Boulevard and Hotelli Seurahuone hotels. The acquisition would make Scandic the largest hotel chain in Finland with regard to sales revenue, with a national market share of approximately 30 per cent. Its key competitor, S Group, has 53 hotels and a national market share of 20-25 per cent.

According to the investigations of the FCCA, the acquisition would affect competition in the accommodation market negatively in Pori, Lahti, Kuopio, Lappeenranta and Vantaa. The hotel market in these cities is already highly consolidated, and the acquisition would only consolidate it further. For corporate customers, the removal of Restel’s hotels from the market would reduce the number of options from three to two, because smaller hotel chains, independent hotels or other forms of accommodation, such as Airbnb, are not comparable with national hotel chains as possible contracting partners. The competitive pressure faced by Scandic would also be reduced, which could lead to a major price increase for customers.

The FCCA obliged Scandic to sell one hotel in Pori, Lahti and Kuopio to its competitors. In the view of the FCCA, this will eliminate the reduction of competition caused by the acquisition. In such a case, the cities will have the same number of hotel operators as before the acquisition, leaving sufficient options open for customers. Scandic also committed to not purchasing back the sold hotels.

The FCCA’s analysis shows that new hotels will open in Lappeenranta and Vantaa within the next two to three years. Scandic committed to not purchase any of these hotels The FCCA estimates that the market entry of new hotels will reduce Scandic’s market dominance and problems associated with competition.

Scandic will initially try to find buyers for the hotels to be sold, but an impartial agent will take over the process after a certain period of time. The sale deadlines will not be published.

FCCA’s decision issued today includes numerous business secrets of the parties involved. The decision cannot be published until the business secrets have been removed, i.e. in around two weeks’ time.

According to the Competition Act, the FCCA must be notified of the transaction if the combined turnover of the parties to the corporate transaction exceeds 350 million euros and the turnover from Finland of at least two of the parties exceeds a combined total of 20 million euros. The FCCA will approve a corporate transaction if it has none of the harmful impacts referred to in the Competition Act. The FCCA will intervene in corporate transactions if its investigations suggest that the acquisition substantially impedes effective competition on Finnish markets or a substantial part of the markets, particularly through the creation or reinforcement of a dominant market position. Where necessary, notifications of acquisitions are considered in two stages. The so-called first stage takes a month at most. If the acquisition is clearly not harmful to competition, or if the harmful effects can be prevented by means proposed by the parties to the acquisition, the acquisition is approved during the first stage. If not, the FCCA decides to conduct a further investigation of the matter, during which the acquisition and its competition effects are investigated in further detail. Even then, the acquisition can be approved either as such or with conditions. If the commitments proposed by the parties are not sufficient conditions for the approval of the acquisition, the FCCA will propose that the Market Court prohibit the sale.