Booking Holdings’ proposed 1.63 billion euro ($1.7 billion) purchase of Swedish peer ETraveli Group was blocked by EU antitrust authorities on Monday after the company failed to allay concerns about its dominance in online hotel reservations, Report informs via Reuters.

The European Commission, which acts as the competition watchdog in the 27-country European Union, said Booking’s remedies were not sufficient to address its concerns.

The veto suggests that EU regulators may be taking a tougher stance on mergers in the digital sector.

EU antitrust chief Didier Reynders said the travel market was becoming more digital, in particular the online travel agency (OTA) market which includes hotels, flights, car rentals and attractions.

Hotel OTAs are worth about 40 billion euros annually, the largest and most profitable segment of the OTA sector.

“The combination of network effects and consumer inertia means that many consumers get information on room availability and prices only from OTAs, often only from Booking,” Reynders told a press conference.

He said the Commission had reached out to almost 15,000 hotels for feedback on the proposed deal.

“Overall, market participants were concerned that the transaction would strengthen Booking’s dominant position on the market for hotel OTAs in the European Economic Area, reduce competition and increase prices for hotels and possibly for consumers.”

Booking said it would challenge the veto, which has won unconditional approval in the United States and Britain.

It also extended a flight agreement with ETraveli to 2028, underlining its determination to grow its flight business despite the EU ruling.

“The European Commission’s decision not only departs from settled law and precedent but it deprives consumers of travel options that they are entitled to have,” Booking Holdings’ Chief Executive Officer Glenn Fogel said in a statement.

The Commission said Booking’s proposal to show multiple hotel options to customers who book flights on its site was not sufficiently transparent and non-discriminatory, and difficult to implement and monitor.

Booking, whose brands include Booking.com, Rentalcars, Priceline and Agoda, announced the deal in November 2021.