Hotel price parity clauses in Italy

Written on 12 Oct 2017

The Italian Parliament has recently decided to ban price parity clauses imposed on hotels by travel agents. The ban is now contained in article 1 (166) of the Annual Competition Law, in force as from 29 August 2017.

According to the provisions of the Law, any agreement by which hotels are obliged not to give consumers better price, terms or other conditions than those applied by the same hotels through third parties is null and void, whatever the governing law applicable to the contract.

Italian rate parity cases

There has so far been only one case in which the issue of price parity clauses has been dealt with. This was the investigation launched by the Italian Antitrust Authority (Autorità Garante della Concorrenza e del Mercato – “IAA”) on 7 May 2014 against the online travel agencies (OTAs) Booking.com and Expedia[1].

The conduct in question concerned the use of “wide” price (and other conditions) parity clauses – the so called “Most Favoured Nation clauses” (“MFN Clauses”) – in contracts between the above mentioned OTAs and their hotel partners.

In particular, these wide MFN Clauses provided that hotel partners could not offer their services (whether directly, through other OTAs or through any other booking channel (online or offline)), at lower prices or with better conditions than those offered on Booking.com’s and Expedia’s platforms respectively.

During the investigation, Booking.com submitted commitments consisting of a significant reduction of the scope of its MFN Clause. In particular, its newly proposed “narrow” MFN Clause “will only apply to prices and other conditions publicly offered by hotels through their own direct online sales channels, leaving them free to set prices and conditions on other OTAs and on their direct offline channels, as well as in the context of their loyalty programs”.

By a decision of 21 April 2015, the IAA, having considered the adequacy of such commitments to address the competition concerns related to Booking.com’s behaviour, accepted those commitments, made them binding on Booking.com and closed the proceedings (in relation to Booking.com only) without any finding of infringement.

It’s worth noting that the IAA’s decision relating to the acceptance of Booking.com’s commitments has been challenged, before the competent Regional Administrative Court (“Tar Lazio”), by Federalberghi – The Italian Federation of Hotel Associations – who claimed that even the narrow MFN proposed by Booking.com and accepted by the IAA should be considered in violation of article 101 of the TFEU. The case is still pending.

Regarding Expedia, by its decision of 23 March 2016, the IAA stated that – on the basis of the information available – the reasons for intervening against Expedia no longer applied. Expedia had, in fact, removed from the existing contracts (and would not include in contracts still to be entered into) the price and other conditions parity clauses. As a result, the company has amended the contracts with the partner hotels in Italy in a way similar to Booking.com.

IAA approach v. the Law

In the light of the above, it can be said that, by accepting the commitments proposed by Booking.com, the IAA has shown a favourable attitude towards “narrow” MFN clauses, which leave the bound hotels free to offer lower prices on alternative online portals and offline (by telephone, email, reception), but not on their own websites.

Compared to the Booking.com and Expedia case, the rule under examination – article 1 (166) of the Annual Competition Law – goes much further, providing that any clause by which a hotel undertakes not to provide customers with better conditions than those practiced by any intermediary will be null and void.

It is worth noting that during the hearing before the Senate Commission (28 October 2015), in the years that preceded the enactment of the Law, the IAA raised some doubts with regard to: i) the wide formulation of the provision in question, which disregards the positioning and market shares of the undertakings in question; ii) the fact that the ban seems to apply not only to clauses contained in contracts between hotels and OTAs, but also to the relations between hotels and traditional travel agencies; iii) the excessive stiffening of the companies’ contractual autonomy; iv) the introduction of national standards potentially capable of artificial segmenting this market, particularly in a market characterized by operators active at European and worldwide level. In the latter respect, according to the IAA, the European Commission could yet raise some doubts as to the compatibility of the rule with European Union law.

[1] See Case I779 – “Mercato dei servizi turistici – prenotazioni alberghiere on line”.