On 16 September 2015, the Competition and Markets Authority (the “CMA”) announced it has closed its investigation into suspected competition law breaches in the hotel online booking sector. Online booking sites Booking.com and Expedia have recently made Europe-wide changes to their practices. In closing the case, the CMA has not reached a decision as to whether there are or were any breaches of competition law.
The OFT’s investigation
The original investigation was opened by the CMA’s predecessor, the Office of Fair Trading (the “OFT”), in September 2010, and was one of a number of similar probes across the EU focused on restrictions in agreements between hotels and online travel agents.
In July 2012, the OFT issued a Statement of Objections alleging that Booking.com and Expedia each entered into agreements with International Hotels Group (“IHG”) which restricted IHG’s ability to offer discounts on room-only accommodation. Subsequently, on 31 January 2014, the OFT announced that it had accepted binding commitments from the parties under which online travel agents and hotels would be able to offer the relevant discounts.
The commitments decision was appealed by Skyscanner, the operator of a ‘meta-search’ site which displays prices offered by third parties to assist travellers to compare prices. Skyscanner’s appeal primarily related to the commitment by the online travel agents to not publicise specific levels of discounts. Skyscanner argued that the commitment restricted the disclosure of pricing information and would have a negative effect on price transparency in the meta-search and comparison market. Skyscanner won its appeal and, in September 2014, the Competition Appeal Tribunal (the “CAT”) remitted the case back to the CMA for reconsideration.
The CMA’s decision to close the investigation
The CMA has reconsidered the case and has decided once again to close the case, this time on the basis of administrative priorities. CMA Senior Director for Antitrust, Anne Pope, cautioned that it is “too soon to tell whether or not the changes made by Booking.com and Expedia will materially change how hotel rooms are priced on the internet. We will continue to watch this closely and welcome views about how the market is developing in light of these changes.”
The CMA’s case closure follows decisions by the French, Greek, Italian and Swedish competition authorities to settle their investigations. A German investigation is ongoing (read our briefing here).
Booking.com and Expedia have made important changes to their practices, allowing hotels across Europe to offer cheaper rates through other online travel agents, offline, and to certain groups of customers. Rate parity continues in relation to prices offered on hotels’ own websites and through certain other direct sales channels.
By making these changes, the hotel online booking sites seem to have satisfied the concerns of a number of national regulators. Interestingly, they have done so without dropping all elements of ‘rate parity’.
‘Rate parity’ and similar ‘most favoured customer’ provisions have become a hot topic for competition regulators around Europe. The approach taken in these cases would seem to be a pragmatic compromise. However, it is likely that the solutions reached here are specific to the hotel online booking sector and, in the absence of clear guidance from the courts or competition authorities, it is hard to say whether this approach to rate parity would be permissible elsewhere.
Interestingly, as Booking.com was conducting its settlement with the French regulator, a law was being passed in France that annuls ‘rate parity’ clauses in agreements between hotels and online travel agents, thereby giving hotels the ability to set room rates on their websites. Therefore, in France, it would seem that even narrow ‘rate parity’ clauses may be ineffective.
The much needed guidance may come out of the European Commission’s e-commerce sector inquiry. In the UK, the House of Lords EU Internal Market Sub-Committee has also launched an inquiry into online platforms. (See our previous briefings on the e-commerce and House of Lords inquiries.) In the meantime, businesses must continue to keep their online practices under close review.