Germany: Hospitality Update Germany: Booking.Com's Best Price Clause Is Now Okay Rules German Court

Last Updated: 10 July 2019
Article by Markus Kotowski and Martin Haller

Key developments

  • The Düsseldorf Higher Regional Court has held that so called narrow best price clauses used by booking.com are permissible.1  Even dominant Online Travel Agencies (OTAs) are now free to forbid hotels to offer rooms on their own websites for less than they do. 
  • Prior to the judgement of 4 June 2019, the German Federal Cartel Office (FCO, Bundeskartellamt) had prohibited the use of all best price clauses in the contracts of booking.com.
  • As a reaction, the German Hotel Association (IHA) has called for lawmakers to outlaw best prices clauses.2
  • Although the court's verdict could still be overturned in the final instance, we expect this decision to have an impact on the market.

DLA Piper insights

  • Booking Holdings Inc.'s website booking.com is the biggest OTA in Germany with an estimated European market share of 66% ahead of Expedia and affiliates (18%) and HRS (9%).3
  • There are two types of best price clauses OTAs have been arguing about with the FCO and the hotel industry for years.

    • "wide" best price clauses: Hotels are not allowed to offer a better price on their own site or on any other websites of other OTAs.
    • "narrow" best price clauses: Hotels are not allowed to offer a better price on their own site, but are free to offer a better price on other websites of other OTAs.
  • In 2015 the Düsseldorf Court had already declared wide best price clauses as contrary to antitrust law, provided that the OTA has a market share of more than 30 percent. This ban of wide clauses remains in force even after the judgment, in which foreclosure of the market against the entry of new, cheaper portals was the main argument.
  • The FCO however had also banned the narrow clauses used by booking.com in 2016. The current judgment lifts this ban and is the result of booking.com's successful appeal against this prohibition.
  • Among other things, the Court had hotels and customers questioned to find out whether the clauses negatively affect effective competition. As a result, the judges followed the arguments of booking.com: If the OTAs were not allowed to forbid hotels to offer a cheaper price elsewhere, this would open the door to free riders. Hotels would benefit from the OTA's website by winning customers there but save themselves the broker's commission by making customers a better offer on their own website.
  • It should be noted that OTAs with a market share of less than 30 percent are generally free to use both narrow and wide best price clauses.

What does this mean for business?

  • There is still a slight chance that this judgment might be overturned. Although no appeal was admitted, the FCO may lodge a complaint relating to non-admission with the Federal Supreme Court against the decision. The FCO stated in a first response that it disagrees with the Court in this matter and made a potential appeal subject to the detailed opinions of the Court, which are not yet public. We expect the FCO to decide on an appeal within the next months.
  • If the judgment remains in force, powerful OTAs such as booking.com are likely to once again try use their position on the market to implement narrow best price clauses to prevent hotels from attracting customers to their own websites.
  • If successful in doing so, this might further increase booking.com's market share and impact hotel operators' revenues and/or lead to higher prices.
  • Especially leading hotel companies might be affected by this judgment, as they mostly run their own websites where potential customers can comfortably reserve / book rooms online, possibly after comparing prices elsewhere.
  • It remains to be seen how the legal situation will develop, also beyond Germany. A Swedish court has prohibited the use of narrow clauses best price clauses, while in some other European countries, i.e. France, Austria, Italy and Belgium, such narrow clauses are even prohibited by law. Therefore, a multi-jurisdictional analysis might be advisable when conducting business in different EU-jurisdictions.

Footnotes

1 Düsseldorf Higher Regional Court, Decision of 4 June 2019 - case number: VI (Kart) 2/16 (V).

2 Press release by the IHA dated 13 June 2019.

3 www.iha-service.de/de/europaweite-studie-zur-hoteldistribution-die-abhaengigkeit-der-hotellerie-von-online-plattformen-nimmt-weiter-zu.

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