It sounds so good: ‘Best price guaranteed’. ‘What could possibly be wrong?’ you think. A lot – according to investigations by various competition authorities. A best price guarantee can inhibit competition and might be banned for that very reason. So when is competition inhibited exactly? When the best price guarantee is offered by a booking site with a strong position on the market. Often the booking site operators have agreed with hoteliers or travel agents that the price for a room or a trip may not be higher than the price offered by other sites. The best price guarantee could then create a situation in which hoteliers, travel agents and other booking sites have no reason to offer rooms or trips at cheaper rates. After all, it is the site with the best price guarantee that benefits most from a price cut elsewhere.
Take, for example, the prohibition that the German Competition Authority slapped on the hotel booking site HRS. HRS has a large share of the German market and put pressure on hoteliers to offer prices and availability that were not more attractive on other websites. The German Competition Authority objected to this practice, which not only inhibited competition between existing booking sites and hotel providers, but also prevented new sites from getting off the ground. A German court had already reached the same conclusion. Similar investigations are reportedly underway in Hungary, Sweden, France, Switzerland and Italy.
The UK Competition Authority took a similar but less drastic decision after Expedia and Booking.com had been banned from giving consumer discounts for hotel rooms in the IHG chain. The Competition Authority closed the investigation after the companies had agreed to allow the hoteliers the freedom to grant discounts. It did, however, allow Expedia and Booking.com to ask consumers to register first and make a booking without a discount. The Competition Authority had no objection to a best price guarantee under these conditions.
The Dutch Consumer Association has previously called on the Dutch Competition Authority (at that time the NMa) to look into the prices of hotel rooms on booking sites. Research by the Consumer Association had shown that hotels often charged the same prices on the Internet. To the best of our knowledge, neither the NMa nor its successor, the Authority for Consumers and Markets (ACM), has launched a formal inquiry. In any case, the Minister of Economic Affairs has announced that there are no indications that booking sites or hoteliers are in breach of competition law.
The ACM has been monitoring the travel sector for some time now. Moreover, one of the themes on its agenda for 2014-2015 is 'the online consumer'. It is therefore fair to assume that the ACM will be checking out the best price guarantees as well. But it may perhaps not be able to prohibit them. It will first have to show that a best price guarantee can inhibit competition in the Netherlands. Not an easy task.
Unfair trading practices
The ACM may, however, decide to set up an inquiry into suspected unfair trading practices. Recently, the Dutch Advertising Code Committee ruled that Booking.com was misleading consumers by saying on its website that only one room was still available. This statement is not, however, binding. The ACM can impose a fine for misleading consumers. Whether this actually applies to Booking.com is open to question. We, for one, would not be surprised if the ACM is keeping a sharp eye on the booking sites.