Thomas Cook Group Limited and Interpayment Services Limited: A report on the acquisition by the Thomas Cook Group Limited of the travellers cheque issuing business of Barclays Bank Plc

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On 9 November 1994 the Secretary of State for Trade and Industry asked the MMC to investigate and report on a merger situation concerning the acquisition by The Thomas Cook Group Limited (Cook) of the travellers cheque issuing business of Barclays Bank plc (Barclays). The terms of reference are at Appendix 1.1.

Both Cook and Barclays, through its subsidiary Interpayment Services Limited (ISL), were major issuers of travellers cheques on a worldwide scale. Cook, which issued MasterCard-branded cheques, had a 32 per cent share of the UK market in 1994 and ISL, which issued VISA cheques, had 17 per cent. The only other issuers of a range of travellers cheques through third party sales agents such as banks, building societies, travel agents and bureaux de change were American Express Company (Amex) with 40 per cent of UK sales and Citicorp with 1 per cent (though it accounts for some 12 per cent of world sales). Thus the merger brought together two of the largest issuers to give Cook about 49 per cent of the UK market.

The issuers of travellers cheques compete for the business of sales agents who sell them to the end customer. The merger effectively reduced from three to two the number of significant issuers from which sales agents in the UK could choose to receive their supplies. The importance of this reduction in the number of issuers depends on whether travellers cheques are a separate market or whether, as the parties argued, they form part of a wider market which includes all the other methods of making payments or obtaining currency overseas (such as cash, debit cards or eurocheques). We concluded that for the present travellers cheques do constitute a separate market but that this situation may be expected to change as newly-developed electronic products with characteristics similar to those of the travellers cheque are introduced.

For the majority of sales agents-banks and building societies-there will in future be a choice between Cook and Amex as supplier and we believe, on balance, that these two companies will continue to compete vigorously for the business of banks and building societies.

However, other considerations affect those sales agents whose main business is as travel agents or bureaux de change. As well as being a travellers cheque issuer, Cook has a major chain of retail travel agents and bureaux de change. Other travel agents and bureaux de change which sell travellers cheques have expressed a number of concerns, among them that Cook may not continue to offer ISL travellers cheques and that Cook's ownership of ISL will allow Cook to acquire commercially valuable information about their business. Prior to the merger ISL, as a subsidiary of Barclays, was not connected with the travel business in any other capacity and so travel agents opting for ISL travellers cheques were not in the position of selling a competitor's product. Now they will effectively have no choice but to offer Amex travellers cheques if they are unwilling to use Cook as a supplier. This provides Amex with the possibility of imposing less favourable terms and the increased costs may then be passed on to consumers. We find that this is an effect of the merger which may be expected to operate against the public interest.

We recognize that some benefits would arise from the merger, for example a gain in UK employment as a result of functions which ISL carried out overseas being transferred to the UK. However, we do not consider that these benefits outweigh the adverse effect we have identified.

We have considered what action should be taken for the purpose of preventing or remedying the adverse effect. We recommend that Cook should:

(a) maintain MasterCard and VISA as separately branded products and retain ISL as the sole issuer's name on the VISA cheques;

(b) not renew its agreement with MasterCard that 60 per cent (or any other particular proportion) of the cheques issued will be of the MasterCard brand; and

(c) take a number of steps to ensure that sales agents who see Cook as a competitor are protected from the possibility of information about their customers or their business getting into the hands of Cook's retail operation.

These remedies increase the prospects that there will be at least two credible competitors for the business of a full range of sales agents in the UK and therefore that consumers will be protected from the increases in charges that could arise from a lack of effective competition.

We do not believe divestment of ISL is the most appropriate remedy but if our other recommendations cannot be implemented we see no alternative to divestment as a way of remedying the adverse effect of the merger.

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