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Booking.com reached a settlement with competition authorities on “most favourite nation” clauses that have been deemed to be in breach of competition laws, with potential consequences for the whole ecommerce market.
This is a guest post from my colleagues Giulia Zappaterra and Laura Borelli, I hope you will enjoy it!
The investigation from Competition Authorities
The Italian, Swedish and French competition authorities announced the achievement of a settlement with Booking.com following an investigation pertaining the inclusion in their ecommerce agreements with partner hotels of price (and other conditions) parity clauses in alleged breach of EU and national competition laws.
This is the result of an investigation initiated by the Italian Competition Authority against Booking.com and Expedia on the so-called “most favored nation” clauses (MFN) preventing hotels using Booking.com ecommerce platform from offering their services at prices lower than – or on terms better than – the ones offered on Booking.com to other ecommerce and offline booking agencies (including the websites of the partner hotels themselves).
Such clauses were suspected to restrict competition on both the fees required by online travel agencies to hotels and the prices of hotel rooms, to the detriment of final consumers.
The settlement
During the investigation, Booking.com proposed a settlement undertaking to adopt “narrower” MFN clauses which would apply to prices and other conditions offered by partner hotels only through their own ecommerce websites, with an additional exception for those customers holding fidelity cards.
Partner hotels will be free to set prices and conditions with other ecommerce sites and on their direct offline channels. The commitments were accepted by the Competition Authorities of Italy, France and Sweden and the changes will come into force on July 1, 2015 and apply for a period of 5 years.
The impact on the ecommerce sector
In Italy the proceeding is still pending for Expedia, which did not take on those commitments. It will be interesting to see how the Italian Competition Authority will decide on Expedia’s case to have a clearer picture of the lawful practices in the ecommerce sector. Indeed the issues raised by the Competition Authority might be expanded to any kind of ecommerce business placing restrictions on prices of products offered online and through land-based channels. Deeper competition reviews of terms and conditions might be necessary to assess the full risk of some contractual clauses.
We will keep track of the evolutions of the matter and follow @GiuZappaterra @LallaBorelli and myself @GiulioCoraggio for updates.
