On 6 April 2017, the European Commission ("Commission") and ten national competition authorities ("NCAs") published a joint report on the use of price parity clauses in agreements between online hotel booking platforms and hotels (the "Report").
The price parity clauses under consideration, also known as "Most Favoured Nation" clauses, require hotels to provide online hotel booking platforms with the cheapest room prices and best room availability, either relative to all other sales channels ('wide' parity clauses) or relative to the hotel's own website ('narrow' parity clauses). Several NCA investigations into online hotel booking platforms have now found that wide parity clauses breach Article 101 of the Treaty on the Functioning of the European Union.
The Report was commissioned by the European Competition Network ("ECN") in November 2015 to monitor the effects of changes to price parity clauses resulting from NCA enforcement action since 2010. Although the Report finds that many hotels surveyed were not aware of changes made to their price parity clauses, data gathered from leading metasearch websites show evidence of an increase in price differentiation between rival online hotel booking platforms.
On 17 February 2017, the results of the monitoring exercise were considered by the ECN. A published meeting note concludes that NCA measures prohibiting wide parity clauses, whilst permitting narrow parity clauses, "go in the right direction". The ECN monitoring group has agreed to keep the online hotel booking market under review and to re-assess the competitive situation in due course, with any new enforcement actions or market investigations closely coordinated with the ECN.
In light of the findings in the Report, the UK's Competition and Markets Authority ("CMA") announced on the same day its decision not to prioritise further investigation into the application of competition law to pricing practices in the hotel online booking sector. The CMA has also announced plans to take steps to raise awareness among UK hotels of changes that have been made to wide parity clauses, adding that it is "too early" to reach any conclusions on narrow parity clauses.
The Report provides an illustrative example of the ECN coordinating a controversial area of antitrust enforcement between Member States. This has become particularly relevant following decisions by Germany's Federal Cartel Office in 2014 and 2015 to prohibit narrow parity clauses (later upheld by the Higher Regional Court of Düsseldorf). It is hoped that the continued monitoring of online hotel booking platforms, and the CMA's decision to discontinue its investigation, is a sign that EU Member States are slowly moving towards adopting a consensus on the parameters of permissible pricing parity clauses.
With thanks to Emile Abdul-Wahab of Ashurst for his contribution.
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