Hotel price parity clauses: bookings, consumers and competition law

A consensus view seems to have emerged among competition authorities in relation to pricing parity clauses imposed by online travel agents, but the sector remains under scrutiny.

19 May 2017

Price parity clauses

Since 2010, competition authorities around Europe have had concerns about the potentially anti-competitive effects of pricing parity clauses (also referred to as 'Most Favoured Nation’ or MFN clauses) used by online travel agents (OTAs) in their contracts with hotels. There are broadly two types of price parity clauses:

  • ‘Wide’ parity clauses: which ensure that an OTA has access to the hotel's lowest room rates (and best room availability) offered through any channel.
  • ‘Narrow’ parity clauses: which allow hotels to offer lower room prices (and better room availability) on other OTAs and offline sales channels, but restrict the hotel from offering better prices (and room availability) on its own website.

Differing approaches were emerging across Europe, and as a result the European Competition Network (ECN) gathered together 10 national competition authorities to produce a joint report. This was published in February this year. Its conclusions:

  1. ‘Wide’ price parity clauses are likely to be anti-competitive.
  2. ‘Narrow’ price parity clauses will be kept under review.
  3. National competition authorities will liaise with each other to facilitate coordination between them going forwards.

Geographic price discrimination

At the same time as this report was published, the European Commission announced that it was conducting an investigation into agreements between the largest European tour operators (Kuoni, REWE, Thomas Cook and TUI) and hotels (Melia hotels) which contain clauses that discriminate between customers based on their nationality or country of residence. This investigation is ongoing, but it seems the Commission is focussing on the potential partitioning effect on the single market of such clauses.

Consumer protection in the UK

Finally, in the UK, the Competition and Markets Authority has also announced recently that it is looking at a number of practices in this sector to determine whether or not they may warrant action under the CMA’s consumer protection powers.

How Burges Salmon can help

All of the above seems to point to continuing uncertainty in the sector as regards competition compliance and consumer protection. Given this, OTAs, tour operators and hotels alike would do well to keep these issues under close review to manage their legal risks going forwards.

Our team of experienced hotels lawyers are well-known for their combination of broad commercial expertise and deep hotel industry knowledge. The team has significant experience in advising on hotel transactions and operational matters, including management agreements, licensing and employment issues, mergers and acquisitions, disposals and restructurings. Please contact Noel Beale or your usual Burges Salmon contact if you would like to find out more.

Key contact

Noel Beale

Noel Beale Legal Director

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