Carnival Corporation and Royal Caribbean International (RCI) are continuing their battle over P&O Princess Cruises (POC) in the public relations arena.

Responding to Carnival's charge that it was engaged in unethical and desperate attacks on its rival, RCI stated last week that it was no secret that it has been aggressively opposing Carnival's hostile take-over bid of POC.

"We have stated repeatedly that Carnival's takeover is harmful to consumers, travel agents and other suppliers," RCI said. "We are educating travel agents to the fact that a combined Carnival/POC would control 50 percent of the cruise market measured in U.S. passenger days. Even if the measurement is U.S. passenger berths, as Carnival states, Carnival would control 49.4 percent," RCI said. "Travel agents understand the harmful effects these numbers would have on their freedom of choice if Carnival were to achieve such a dominant position."

"Blatantly Untrue"

RCI's response was prompted by a letter issued by Carnival in which Carnival said it was seeking to clarify its position on the Federal Trade Commission (FTC) filing in what it said was in response to lobbying efforts by RCI whereby travel agents are being urged to write the FTC opposing Carnival's bid for POC.

According to Carnival's letter, RCI has hired a lobbying firm to request that travel agents write to the FTC. The firm has called and faxed agents, according to Carnival, which said the fax contained misleading information about the merger.

Carnival said that travel agents are being asked to write a letter saying that they are opposed to Carnival buying POC; that Carnival will have too much power over prices and that their clients will have no real other choices, and that Carnival could lower or cut commissions to travel agents altogether.

RCI could not be reached for comment, nor could anyone at Carnival. However, Carnival said in a prepared statement that "all of these allegations are scare tactics that are blatantly untrue."

According to Carnival, RCI claims that Carnival would control more than half of the U.S. market. The fact of the matter is, Carnival said, that regardless of whether Carnival or RCI were to be successful in a proposed merger with POC, the newly merged entity would control less than 50 percent of the cruise berths.

Carnival added that all the cruise companies compete in the vacation market, however, of which cruising represents less than three percent.

Carnival called RCI's efforts another in a series of unethical and desperate attacks to undermine its efforts with regulators in both Europe and the U.S.

"RCI has deliberately and selectively spread misinformation and falsehoods in its campaign of lies aga inst our company and violated a confidentiality agre ement with the European Commission all in an effort to spoil our proposed merger," Carnival stated.

"We are the best managed company in the business," Carnival continued. "We have a track record of achieving synergies and efficiencies in previous merger transactions. These mergers have resulted in the strengthening of these brands and have clearly benefited travel agents and consumers alike."

Carnival said its brands operate independently, which allows each company to set its own individual pricing and commission policies; and that unlike RCI it does not force agents to sell all of its brands to achieve maximum commission levels. RCI, meanwhile, said its merger with POC would result in continuing vigorous competition, with two virtually equal competitors in the cruise market. That is why travel agents support the RCI merger with POC over Carnival's hostile bid by more than a two-to-one margin, according to a Travel Weekly survey, RCI stated. RCI also said that it is informing agents that they should let their voices be heard by communicating any concerns directly to the FTC. Said RCI: "The facts show that Carnival's take-over is anti-competitive and RCl's merger is pro-competitive. RCI will continue to inform regulators, consumers and travel agents of those facts."

RCI also announced that the "American Antitrust Institute (AAI) has recognized that the RCI/POC combination would create a firm equal in size to Carnival, while the Carnival/POC combination would create a dominant firm with half the market." The AAI is a Washington-based, independent, non profit organization.

The AAI told Cruise Industry News that RCI cited a letter that the AAI submitted to the FTC last week essentially stating that both the RCI/POC and the Carnival/POC combination raises significant competitive issues in the North American cruise market.

The AAI also said it was concerned about anti­ competitive issues in the upstream market segment.

The AAI said it concluded that neither combination should be allowed to proceed.

While the two companies were battling on the many fronts, Carnival Chairman Micky Arison met with European Union Commissioner Mario Monti, allegedly to seek approval for Carnival's bid for POC. Arison was said to have asked Monti to view the cruise comparues and the cruise market as part of the much larger vacation market in which cruise is only a small part.


It is noteworthy that it is Carnival that is crying "foul" although it was Carnival that made a hostile bid for POC attempting to derail the RCI/POC merger.

Meanwhile, we are sure that Carnival and RCI are both making their moves to influence the market and the regulators.

In addition, the joint venture between RCI and POC to establish a southern European cruise company seems to have evaporated(?). The joint venture was supposed to receive newbuilds that both companies have under option that are due to expire this month but have not yet been exercised.

So how hot a potato is this? Hot enough that spokespeople do not seem to want to go on record. They are "on vacation, away from their desks, or out to lunch," and not returning calls.

If the regulators approve both deals, Carnival is expected to acquire POC as its offer is monetarily superior to RCl's. But in light of POC management's seeming aversion to Carnival's bid, we can speculate that some deals have probably been struck behind the scenes between RCI and POC.

And if Carnival succeeds, the combination will clearly create the largest cruise company by far controlling approximately half the worldwide cruise capacity.

If instead RCI succeeds, there will be two nearly equal giants in terms of cruise capacity, Carnival and the new RCI/POC combination.

So far, both the British and the German regulators have approved the proposed RCI/POC merger.

The European Commission and the FTC, which are studying both combinations, are expected to reach their decisions next month (August).

If neither comes to fruition, Carnival will continue to be the largest and strongest cruise company, followed by RCI and POC.

However, we can then await Carnival's next move. After all, Carnival is flush with cash despite its aggressive newbuilding program.