European Commission releases results of pan-European survey regarding the effects of remedies taken by Online Travel Agencies over parity clauses.

Written on 24 May 2017

On 6 April 2017, the European Commission released its report outlining the results of a questionnaire sent to the main players in the online travel industry last summer. The report followed on from commitments given in spring 2015 by a leading online travel agency (OTA),, with respect to competition issues caused by parity clauses contained in its contracts with hoteliers.

Established by a European Working Group composed of National Competition Authorities (NCA) of ten member States under the aegis of the European Commission, the report aimed at providing an assessment of the OTAs’ commitments’ impact across the EU, with the aim that this would lead to a common approach to rate parity clauses for NCAs across the EU.

While the working group’s  findings may appear of limited scope, the report confirms that tackling price parity clauses will remain a priority for competition watchdogs, as the French Competition Authority (FCA) also recently confirmed.

What are “rate parity clauses”?

Rate parity clauses are often referred to as “most favoured nation” clauses. An absolute (or “wide”) rate parity clause requires the hotelier to offer the online booking platform the best tariffs and conditions granted via any distribution channel, either online or offline, to any customer (including on the hotel’s own website).

Under EU competition law, such clauses could be considered to unduly restrain the hoteliers’ commercial freedom. Therefore,  it is now relatively well-established that ‘wide’ rate parity clauses are caught by the prohibition on anticompetitive agreements.  However, the position on ‘narrow’ rate parity clauses (where the hotel agrees only not to itself undercut the booking platform, but where this does not apply to other OTAs) is far less clear, with individual member states taking a divergent approach (for more on wide/narrow rate parity clauses, see here).

A pan-European issue

In the context of combined investigations of several national competition authorities, in spring 2015 leading OTAs submitted commitments to amend their price parity clauses and remove any clauses concerning competing platforms, along with any hotel parity obligations in terms of the availability of rooms or commercial conditions.  The NCAs announced that the commitments would be subject to an intermediary assessment before 1 January 2017. As expected, this assessment took place before the end of 2016 (for France’s findings, see here).

The efficacy of an EU wide approach resulting from the OTAs’ commitments to the entire European Economic Area )under pressure from multiple competition investigation in several EU member states) was jeopardised by certain National lawmakers, which passed laws prohibiting all kind of parity clauses, and by multiple proceedings before certain National courts targeting parity clauses involving different OTAs.

A new methodology

In these circumstances, a European Working Group was set up by the European Commission in December 2015 to prepare and conduct a Europe-wide monitoring exercise.  The Working Group consisted of the NCAs of 10 member states (Germany, Belgium, France, Hungary, Ireland, Italy, the Netherlands, Czech Republic, the UK and Sweden), together with the European Commission. Accordingly, the Working Group launched a survey among hoteliers to assess the effect of the various remedies implemented.

This survey consisted of an electronic questionnaire sent to 16,000 hotels in 10 Member States and written questionnaires to a sample of 20 OTAs, 11 meta-search websites and 19 large hotel chains (including the 10 largest in the EU), covering the time period from January 2013 to January 2016. The questionnaire had a particular focus on the period before and after the switch by OTAs from wide to narrow parity clauses (mid-2015).

The questionnaire was issued last July, with the closing date for responses being  8 August 2016. On 17 February 2017, an “ad hoc” meeting of the European Working Group reviewed the survey’s results, upon which the EU Commission produced its report.

Interesting results and unanswered questions

The central issue around rate parity clauses is that they restrict a hotel’s ability to offer different rates on different platforms.  Only 21% of the hotels declared that they now offered different prices to different OTAs, mostly (54%) with the view of increasing the hotel’s visibility on a particular OTA (for example, its display ranking). In France and Germany taken together, the share is slightly higher (27%). This means that no less than 79% of the hotels had responded that they had not price differentiated between OTAs. The majority of respondents (53%) explained in this respect that they saw no reason to treat its OTA partners differently. Interestingly, 20% of the respondents explained that the lack of price differentiation was due to the difficulty of managing different prices on different OTAs.

The analysis of room price data from one or more major meta-search websites showed that an increase in room price differentiation between OTAs by hotels resulted from the switch from wide to narrow parity clauses by leading OTAs in 8 of the 10 participating Member States. Such a trend is also observed in Germany, where’s narrow parity clause was prohibited, and in France where the Loi Macron entered into effect during the assessed period.

Concerning room availability, 69% of the hotels responded that the switch to narrow parity clauses did not lead to differentiation between OTAs. In France and Germany taken together, this figure is slightly lower (63%). Here also, the majority of respondent (60%) explained that they saw no reason to treat their OTA partners differently.

Regarding OTA commission rates, 90% of hotels noticed no change in the basic commission rate charged to them by OTAs in the period from July 2015 to June 2016. Moreover, the average effective rate of commission (including optional additional commission paid in return for increased visibility or other benefits) paid by hotels remained relatively stable or slightly decreased. Very few hotels (around 3%) said that they engaged in trade-offs in in order to grant OTAs more favourable room prices or room availability in return for a lower commission rate.

Nonetheless, while the report makes interesting reading, it is heavily caveated. The low response rate in certain Member States, the over-representation of hoteliers from large hotel chains, and the impact of France’s terrorist attacks on tourism in November 2015 all mean the results are less representative than was initially hoped. It is important, therefore, to keep the questionnaire’s results in perspective. In particular, no less than 47% of the hotels that responded to the electronic survey across the ten participating Member States said that they did not know that leading OTAs had recently changed or removed their parity clauses.

What’s Next?

There was hope that a pan-European approach might lead to some clarity in the approach of competition authorities to rate parity clauses.

However, the responses provided by the industry seem imperfect and will possibly lead competition authorities to maintain their efforts in collecting data regarding the effects of rate parity clauses on competition, before formulating a uniform strategy.

According to a recent press release from the FCA, the European Commission and NCAs have agreed on a common and coordinated plan to keep the online booking sector under review. In France, the FCA’s findings in the case raised OTAs awareness that the FCA may now potentially release an own-initiative opinion that will impact not only, but the entire sector.