The anti-competitive effects of price parity clauses – or most favored nation clauses – used by online travel agencies (“OTAs”) in their contracts with hoteliers have been under increasing scrutiny by both national courts and EU regulators (see the February 2015 and June 2015 editions of the EU & Competition Law Bulletin). This topic has now been addressed by law-makers in France through a specific amendment to the French Code of Tourism which puts an end to price parity clauses in contracts between hotels and OTAs and calls for an immediate re-drafting of these contracts.
The price parity clauses in question stipulated that French contracting hotels had to provide OTAs with prices equal or better than those charged by the hotel directly to their clients (“direct booking channels”) or to other OTAs or physical travel agencies (“indirect booking channels”). On top of these price parity clauses, OTAs frequently added booking conditions parity clauses which prevented French contracting hotels from offering to customers better booking conditions (e.g. free spa access, free breakfast, or free wifi) both on other direct and indirect booking channels.
The French Competition Authority (“FCA”) launched an investigation regarding OTAs back in 2013. Not satisfied with Booking.com’s initial proposed undertakings of December 2014 in order to avoid or alleviate a finding of liability, the FCA required further commitments from Booking.com. The revised Booking.com commitments of April 2015 extended the scope of Booking.com’s elimination of price parity clauses and added the elimination of booking conditions parity clauses. However, the revised commitments still did not allow for contracting hotels to be able to publish lower rates on their own website, or through mobile applications. The FCA accepted these revised commitments (see the June 2015 edition of the EU & Competition Law Bulletin).
Nevertheless, notwithstanding such commitments, the Paris Commercial Court on 7 May 2015 issued a ruling specifically on the contracts between hotels and OTAs. This ruling signaled a different, more drastic, approach to the price parity clauses, which were pronounced null and void in application of Article L442-6, I, 2° of the French Commercial Code as they create a “significant disequilibrium” between the contracting parties.
This shift has since been confirmed by the French legislative power through a specific addition to the French Code of Tourism in August 2015 (Law n°2015-990 of 6 August 2015).
Pursuant to this new law, contracts in France between hotels and OTAs must necessarily take the form of an agreement whereby the OTA acts as the agent of the hotelier (“contrat de mandat”). If no such agreement is signed by and between a hotel and the OTA, a fine may be issued to the OTA’s legal representative (in the amount of €30,000 for individuals and €150,000 for legal entities such as Booking.com or Expedia).
Moreover, the new contracts must specify room prices and the prices for other services offered.
Contracting hotels are now legally entitled to offer to the public better rates or booking conditions compared to those conditions offered by OTAs. This possibility offered to contracting hotels is absolute; it therefore does not differentiate between booking channels and it includes the contracting hotel’s own websites or mobile applications, as opposed to the Booking.com commitments accepted by the FCA.
These legal provisions apply no matter where the OTA is located, as long as the booking relates to a hotel located in France.
The law entered into force immediately, which effectively put an end to those non-conforming contracts between hotels and OTAs in place before August 2015.