French Law 2015-990 for economic growth and activity, known as the “Macron Law”, entered into force on 6 August 2015 and introduced major innovations to French competition law as well as commercial and distribution law.
One specific issue that the Macron Law covers is the role of online hotel reservation platforms and online travel agents (“OTAs”). This has been a hot topic lately in Europe with investigations launched by several national competition authorities into the practices of leading online platforms.
Regulators in Italy, Sweden Denmark, Greece, Ireland and France have closed their investigations on the back of changes made by the leading online platforms to their practices, whilst in Germany and Switzerland proceedings are still ongoing (see our previous briefing here). The newly introduced Macron Law has instigated further rules that apply to all contracts between hotels and OTAs for online reservations.
- Commitments taken in the Booking.com case
So-called price parity clauses were at the centre of the FCA decision. These clauses allow online reservation platforms and OTAs to have access to prices that are as low as those available on hotels’ own sales channels and ensures they remain competitive. Price parity clauses are supposed to set price floors for hotel rooms and this is considered to have an anti-competitive effect not only to the detriment of hotels, but also between Booking.com and other online reservation platforms including new entrants.
In April 2015, the French Competition Authority (the “Autorité de la concurrence”, hereinafter referred to as the “FCA”) obtained particularly extensive commitments from Booking.com with the aim of boosting competition between online booking platforms and giving hotels more freedom in commercial and pricing matters.
These commitments came into force from 1 July 2015 for a 5-year period. The commitments made by Booking.com focused on parity clauses and involved:
- The removal of any price parity obligation between Booking.com and other OTAs
Hotels can offer lower prices than those displayed on Booking.com via online booking platforms other than Booking.com. As a result, hotels are able to adapt their prices on other online third party reservation platforms (such as Expedia.com) so as to reflect the quality of services, room availability and/or level of commission rates provided by those competing platforms. Those platforms may display these lower prices on their own websites, on comparison sites, and on search engines.
- The removal of the price parity between Booking.com and offline hotel channels
Under the FCA decision, hotels can offer lower prices than those available on Booking.com through their own direct offline channels only, i.e. over the telephone, at the hotel reception, through bilateral emails, and through travel agencies.
- Restrictions to online sales made by hotels on their own websites
However, hotels would remain unable to offer prices that are lower than those granted to Booking.com on their own websites. Indeed, prices offered by hotels that are more favourable than those granted to Booking.com may not be published or marketed online to the general public on the internet (through hotel websites, comparison sites and search engines) or by means of mobile phone applications.
- The removal of parity obligations in relation to conditions and availability
Under the FCA decision, Booking.com may no longer insist on obtaining more favourable conditions (e.g. gym/spa/internet access, better cancellation rights, etc). Indeed, hotels are free to offer to other OTAs conditions that are more favourable than those offered to Booking.com. In addition, hotels may also offer more favourable conditions on their own offline channels, as listed above.
Furthermore, hotels are free to manage their availability and capacity. As such, hotels may allocate to Booking.com fewer rooms than they grant to competing online reservation platforms and/or reserve for their own channels.
- Macron Law
Notwithstanding the commitments made by Booking.com, the Macron Law has taken a step further in the regulation of OTAs’ activities and contracts. Indeed, the new legal provisions impose new obligations with a view to opening the whole sector, not just Booking.com, to competition on prices.
The relationship between online reservation platforms and hotels is now defined as a “mandate contract”. Under this legal scheme, OTAs act as a “mandataire” in name and act on behalf of hotels. The remuneration of the “mandataire” is however freely determined by the parties.
Crucially, hotels now remain totally free to grant their customers any reduction or rebate, and any clause to the contrary shall be deemed null and void.
In practice, this scheme puts an end to any price parity clauses granted to OTAs, which are no longer permitted.
The Macron law allows hotels to offer the prices they want through any channels, including on their own website, regardless of the prices offered on any online reservation platforms.
Should an online reservation platform operate without a written “mandate contract”, a substantial fine of up to 30,000 euros or 150,000 euros may be imposed.
It is explained that these rules shall apply regardless of where the online reservation platform is established, provided that the service is performed for the benefit of a hotel established in France. As a consequence, the French Macron law should apply to contracts entered into by French hotels with OTAs established and/or operating from outside France, with a view to limiting the risk of attempts at circumventing the new rules.
In that respect, the Macron Law provides that all contracts entered into between hotels and online reservation platforms prior to the entry into force of the Macron Law cease to have effect upon the entry into force of the Macron Law. As such, all such contracts are to be considered null and void as of 8 August 2015. What remains to be determined, however, is whether the relevant French authorities and Courts will consider this new legislation to be of mandatory public order (“loi de police”) such that contracts including price parity clauses but governed by a foreign legislation are null and void as result of the new law.
Given the terms of the Macron law, it can nevertheless be considered that prices parity clauses are no longer applicable with French hotels regardless of the law governing the contract.
Price parity and similar ‘most favoured nation’ provisions have become a hot topic for competition regulators across Europe in recent months as part of a wider focus on online restrictions. As mentioned above, Booking.com has settled investigations into its practices in Italy, Sweden Denmark, Greece, Ireland and France, and the UK competition regulator, the Competition and Markets Authority, has closed its investigation (see our previous briefing here). However, the Bundeskartellamt rejected commitments from Booking.com and is pursuing charges following a similar investigation into another OTA (read our briefing here). The same is the case in Switzerland.
It is clear that online sales and e-commerce are a key enforcement priority for both the European Commission and national competition authorities, and the Macron Law shows that the FCA is willing to be one of the more active competition authorities in developing legal principles and guidance against online restrictions. Nevertheless, it is not always straightforward for companies to maintain compliance and organisations with operations in Europe must therefore ensure that their trading and distribution practices are reviewed regularly as regulators can impose substantial fines for competition law breaches.
Further, any hotel or online travel agent or hotel booking platform that have entered into agreements in relation to the hotel accommodation should consult their legal advisers as to the legal status of their contracts as a matter of urgency.