European competition watchdogs’ pressure on Online Travel Agencies continues as the French Competition Authority releases an intermediary assessment of commitments regarding parity clauses

Written on 13 Mar 2017

On 9 February 2017, the French Competition Authority (FCA) released its awaited intermediary assessment of the commitments submitted in April 2015 by leading online travel agency (OTA) Booking.com with respect to competition issues caused by parity clauses contained in contracts with hoteliers.

2016 saw the issue of rate parity clauses continue to develop across the EU and 2017 seems set to follow in the same direction. To assess the impact across the EU and perhaps reach a common position, the European Commission and the competition authorities of ten member States have gathered into a European Working Group, which is expected to release a report in the next few weeks, based on the questionnaire sent to the industry last summer.

What are “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 and so 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) is far less clear, with individual member states taking a divergent approach (for more on wide/narrow rate parity clauses, see here).

New methodology and open questions

In the context of combined investigations by Italian and Swedish competition authorities, the FCA received in April 2015 commitments from Booking.com to amend its price parity clause and remove any clause relating to competing platforms, but also the hotels’ parity obligations in terms of the availability of rooms or commercial conditions.

The FCA 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.

On 9 February 2017, the FCA released its findings.

Although the FCA praises a “very useful” exercise that “opens new ways of analysis“, the Paris attacks in November 2015 and the enacting of law No 2015-990 (the “Macron law”) are said to have “radically disrupted” the assessment due to their significant impact on tourism. Taking these events into account, the FCA observes progresses in pricing variation among hoteliers, but the scope and representativeness of such variation are difficult to measure. Above all, the FCA notices that the parties provided no evidence that allowing the pricing variation resulted in increased competitive pressure on OTAs.

In such conditions, the FCA remains “particularly vigilant” over the implementation of Booking.com’s commitments and, most importantly, affirms it “does not exclude to issue own-initiative opinion if changes in competition so require“.

The pan-European issue

The European approach resulting from the extension of Booking.com’s commitments to the entire European Economic Area under pressure of multiple competition investigation in several member states of the EU was jeopardised by certain national lawmakers. Those Member States passed laws prohibiting all kind of parity clauses, and initiated several proceedings before national courts targeting parity clauses involving different OTA’s platforms.

In such 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 consists of the competition authorities of 10 member states (Germany, Belgium, France, Hungary, Ireland, Italy, the Netherlands, Czech Republic, the UK and Sweden), together with the European Commission. It launched a survey among hoteliers to assess the effect of the remedies implemented. The questionnaire was opened for contributions last July and closed on 8 August 2016.

What’s next?

An “ad hoc” meeting of the European Working Group to review the survey’s results took place on 17 February 2017. According to the press, its results may be released in the coming weeks, later than initially expected. It is hoped that this pan-European approach might lead to some clarity in the approach of competition authorities to rate parity clauses.

In France, the FCA’s findings in the Booking.com case raised OTAs’ awareness that the FCA may now potentially release an own-initiative opinion that will impact not only Booking.com, but the entire sector.