On 20 December 2013, the German Federal Cartel Office (the “FCO”) prohibited hotel portal company HRS, from applying its “best price” clause which required HRS’s hotel partners to offer their lowest rates on its booking website.
The FCO ordered HRS to remove the clause from its contracts and general terms and conditions by 1 March 2014 to the extent the clause affects hotels in Germany. The FCO also initiated proceedings against the companies Booking and Expedia whose contracts with hotel partners include similar clauses.
The ‘most favoured customer” clause used by HRS obliged its hotel partners to always offer their lowest room price, maximum room capacity and most favourable booking and cancellation conditions available on the internet via the HRS portal. Since March 2012, HRS also barred hotels from offering better conditions to customers who booked directly through the hotel. The application of the clause established a most favoured nation status on HRS, which is the leading reservation portal in Germany.
Andreas Mundt, President of the FCO, stated: “Only at first view, most favoured customer clauses used by online booking portals seem to benefit consumers. Ultimately, they prevent others from offering lower hotel prices elsewhere. Moreover, they make the market entry of new platforms considerably more difficult.”
In view of its market share of more than 30% in the last four years, the HRS’s best price clauses are not exempted under the EU Block Exemption for Vertical Restraints. The FCO left it open whether it considers the “best price clause” a “hardcore restriction”, which cannot be exempted under the Block Exemption and which would likely be prohibited even if online portals have a market share of less than 30%.
HRS may file an appeal against the order with the Düsseldorf Higher Regional Court and apply for interim relief against the immediate enforceability of the order.
The FCO pointed out that the terms of contract between internet platforms and hotels, including the anti-competitive effects of “best price” clauses, are also relevant for other competition authorities, both within and outside the European Union. It said that it was working closely with its foreign counterparts on this matter.
This news was followed by regulatory action by the UK competition authorities against Expedia and Booking.com for similar clauses with hotel chains. The story can be read on our recently launched blog at eu-competitionlaw.com.