reading # 17 (2)

reading # 17 (2) - ALDEASA AND THE EU DUTY FREE ABOLITION(B...

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A LDEASA AND THE EU D UTY F REE A BOLITION (B) 1 “Seldom in the history of the European Union has so much money and time been spent by such a wide coalition of interests on trying to reverse a Council decision. I can understand that lobbying budgets increase exponentially with the difficulty of the objective sought, and that duty-free lobbying budgets are enormous…” Mario Monti, EU Commissioner for the Internal Market, September 1997. In June 1997 SEPPa (Sociedad Española de Participaciones Patrimoniales), a government agency which owned 80% of Aldeasa, announced the structure of the privatization process. Ta- bacalera, a company in which SEPPa also owned a 52% stake, acquired AENA’s 20% stake and then fully subscribed a capital increase, raising its stake to 30%. Tabacalera held a monopoly on the distribution of cigarettes in Spain. The two companies would develop innovative market ini- tiatives to further enhance Aldeasa’s airport retailing business, both duty free and duty paid. Ta- bacalera also had important logistical operations that could benefit Aldeasa. The remaining 70% of Aldeasa’s capital were sold to domestic and foreign institutional investors through an IPO in September of 1997. Aldeasa made its debut on the stock market on September 29, at €19.89. As expected, the impact of the abolition on the company’s operations was a major issue raised by investors. To address the issue, Aldeasa developed and implemented an integrated market and nonmarket strategy. Aldeasa Goes to Brussels In the EU arena Aldeasa pursued a coordinated non-market strategy with the rest of the duty free retailers. The small number of players, the absence of head-to-head competition (as retailers operated in under exclusive concessions in different airports) and the pre-existing relationships through some related organizations such as the Tax Free World Association favored the forma- tion of a broad coalition. In 1995, the two main industry associations came together to jointly fight the abolition of intra-EU duty free sales: the French AFCOHT (Association Française du Commerce Hors Taxes - luxury articles) and the Anglo-Saxon IDFC (International Duty Free Confederation - spirits and cigarettes). Together with duty free operators they sponsored the creation of the European Travel Research Foundation (ETRF), to gather data on the impact of abolition. ETRF’s membership included retailers, airport authorities, carriers, suppliers and trade asso- ciations. Its first objective was to create an accurate database for the EU market, establishing its value and identifying the proportion of duty free sales made to intra-EU travelers. Between January and July 1997 the ETRF ordered 35 in-depth research studies from “independent” con- sultants, in order to assess the impact of the abolition of intra-EU duty free in such sectors as air and sea transport, tourism, producer industries, employment and public finances. A summary of the studies is shown in Exhibit 1, and served as a basis for the coalition’s informational strategy. The coalition hired an impressive group of top EU lobbyists in Brussels (including two ex-
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This note was uploaded on 11/29/2010 for the course PSC 222 taught by Professor Jing during the Spring '10 term at Rochester.

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reading # 17 (2) - ALDEASA AND THE EU DUTY FREE ABOLITION(B...

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