On 6 April 2017, a European Competition Network ("ECN") Working Group consisting of the European Commission and 10 national competition authorities ("NCAs") published a report monitoring competition within the online hotel booking sector in light of earlier investigations.
This report is published amid divergence in the treatment by NCAs, and by legislators, of price parity clauses imposed by large online travel agents ("OTAs") (see VBB on Competition Law, Volume 2016, No. 11, available at www.vbb.com). By way of background, between 2014 and 2015 several NCAs scrutinised the use of so-called "wide" parity clauses by OTAs (see VBB on Competition Law, Volume 2015, No. 5 and VBB on Competition Law, Volume 2016, No. 1, available at www.vbb.com). In brief, such a wide clause requires a hotel contracting with an OTA to offer the OTA the lowest room prices and best room availability relative to all the other sales channels. In contrast, a "narrow" parity clause prohibits the hotel from displaying on its own website prices lower than the prices displayed on the OTA's portal, without restricting the hotel's right to offer rooms at a lower price on other booking portals. In April 2015, the NCAs in France, Italy and Sweden obtained commitments which limited the scope of wide parity clauses, due to concerns that they reduced competition on online hotel booking platforms. In December 2015, the German Federal Cartel Office ("FCO") took a more restrictive approach in prohibiting both narrow and wide parity clauses.
In December 2015, the ECN Working Group was established to monitor the effects of remedies offered in hotel booking platform cases. Given the inconsistent results in some earlier investigations, the NCAs furthermore agreed not to open further proceedings without coordination.
The report results from a yearlong information-gathering exercise. It concludes that measures adopted to address parity clauses, namely: (a) allowing OTAs to use narrow parity clauses; and (b) prohibiting OTAs from using wide clauses "have generally improved conditions for competition and led to more choice for consumers". It therefore found no evidence that narrow parity clauses are anti-competitive. The report notes that the theory of harm for wide clauses is, first, that they lead to a softening of competition between incumbent OTAs and, second, that they foreclose entry or expansion by new or smaller OTAs. The ECN further decided to keep the online booking sector under review and to "re-assess the competition situation in due course".
In light of the report's findings, the UK's Competition and Markets Authority ("CMA") has stated that it will not prioritise further investigations into the hotel online booking sector, noting that "it is too early to reach any conclusions on whether so-called "narrow" parity clauses should separately be regarded as giving rise to competition concerns". On the other hand, the response of the German Bundeskartellamt ("BKA") maintains its view that both narrow and wide parity clauses are restrictive, stating that "such parity clauses restrict competition between the different OTAs and between hotels".
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