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European Commission publishes report on effectiveness of enforcement in online hotel booking sector

European Commission publishes report on effectiveness of enforcement

European Commission publishes report on effectiveness of enforcement in online hotel booking sector

01.05.2017 NL law

On 6 April 2017, the European Commission published the results of a monitoring exercise conducted in the online hotel booking sector together with ten other national competition authorities (NCAs). The exercise was aimed at measuring the effects of changes made to the "price parity clauses" that online travel agents (OTAs) included in contracts with hotels following interventions by NCAs.

Price parity clauses – otherwise known as "most favoured nation" (MFN) clauses – are designed to ensure that a buyer's counterparty will offer its services under terms that are at least as favourable as those offered to any other buyer. In the online booking sector, OTAs typically adopted "wide" MFN clauses, forcing hotels to offer an OTA the lowest room prices and best room availability compared to all other sales channels, including other OTAs, offline channels, and the hotels' own websites. In practice, this would result in the same prices offered on all OTAs. Various NCAs claimed that MFN clauses reduced competition between OTAs and could foreclose new entrants [see our October 2013 Newsletter].

The 'monitoring exercise' was commissioned to assess the impact of the different approaches taken by NCAs to address the competition concerns caused by MFN clauses. While the German and French NCAs decided to impose an outright ban on MFN clauses, others forced OTAs to adopt so-called "narrow" MFN clauses. Narrow MFN clauses allow hotels to offer lower rates to other OTAs and offline travel agents, but prohibit them from offering lower prices on their own websites.

Overall, the results show that the enforcement measures resulted in increased room price and room availability differentiation on OTAs in the last couple of years. On the other hand, there is no clear evidence that antitrust enforcement resulted in lower commission rates charged by OTAs. Based on the current results of the survey, it is unclear whether the outright ban on MFN clauses in Germany and France led to better results than the switch to narrow MFN clauses in the other countries. The results also show that a large number of hotels were simply unaware that OTAs had made any changes in their contracts, making it difficult to properly monitor the effects of the changes.

This 'exercise' is yet another example of European competition authorities' increased focus on e-commerce markets [see Asics below]. It also shows that NCAs are willing to explore diverging approaches to address competition concerns in "new" or previously untested markets, while understanding that post-enforcement monitoring may pave the road to a common approach. Based on the results, the Commission and the NCAs have agreed to keep the online hotel booking sector under review, but that new enforcement actions in the online hotel booking sector will be closely coordinated.

This article was published in the Competition Law Newsletter of May 2017. Other articles in this newsletter:

  1. Court of Justice allows use of evidence received from national tax authorities
  2. Court of Justice clarifies parental liability rules in the context of prescription
  3. Dusseldorf Court confirms that Asics' online sales restrictions violate competition law
  4. Hague Court of Appeal rules on interpretation of object infringements
  5. Commercial Court of Ghent grants compensation to parallel importers for competition law infringement by Honda

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