The EU and the UK publish findings on online hotel booking platforms

On 06 April 2017, the Commission issued a report on online hotel booking, a result of a coordinated work carried out by the Belgian, Czech, French, German, Hungarian, Irish, Italian, Dutch, Swedish and UK national competition authorities and the European Commission in the course of 2016.

The origin of the report comes from the necessity to assess the outcome of the different actions taken by those national authorities regarding practices implemented by online travel agents such as booking.com.

Indeed, it was observed that, in several States, these operators imposed “wide parity clauses” in their contracts with the hotels, forcing hotels to give them the lowest room prices and the best room availability granted to all other channels (offline channels and online channels - travel agents websites and hotels’ websites).

The online travel agents would also impose “narrow parity clauses”, enabling hotels to offer lower room prices and better price availability on other channels, excepted on their own websites.

The work done by the competition authorities focused on monitoring the hotels behaviours and the way they marketed their rooms. The investigation focused on the central parameters which had been under scrutiny, namely the price differentiation and availability differentiation made by the hotels between the different channels, and the commission rates applied by hotels to the online travel agents.

Two monitoring tools were used: (i) questionnaires sent to 16,000 hotels, 20 online travel agents, 11 metasearch websites and 19 large hotel chains and (ii) analysis of metasearch database comparing the strategy followed by the hotels before and after the online travel agents’ commitments.

The results show that:

• Less than half of the respondents were aware of the change or removal of the parity clauses made by Booking.com and Expedia, this figure being lower in France and in Germany.

• Most of the respondents (79%) indicated that they did not differentiate prices between online travel agents, since they did not see any reason to treat them differently.

• Hotels are afraid of the penalization which could arise from the online travel agents.

For those who effectively proceeded to differentiation (21%), the main reason was to increase their visibility on a specific website.

The analysis of metasearch database showed that the change from wide parity clause to narrow parity clause increased price differentiation (as well as the prohibition of Booking.com’s narrow parity clauses in Germany).

• As for the room availability, 67% of the respondents stated that they did not differentiate between online travel agents, mainly because they did not see any reason to treat them differently.

• Finally, no significant change has been observed regarding the commission rates charged by hotels to the online travel agents.

Based on these results, the EU Commission and the national competition authorities have decided to keep monitoring this sector in a coordinated way.

Simultaneously, the CMA published its preliminary findings of digital comparison tools (DTC)

The CMA conducted a preliminary analysis on DCTs, understood as “web-based, app-based or other digital intermediary services used by consumers to compare and/or switch between a range of products or services from a range of businesses”.

This analysis focuses on three industries where DCTs are used by consumers: travel, utilities and financial services.

The CMA found that the DTC tools were positive for consumers, since they decreased consumers’ searches, switching and transaction costs, by offering consumers the ability to compare the offerings of different suppliers and filter them based on individual consumer preferences.

The DTCs also benefit to suppliers since they reduce supplier costs (eg advertising) and facilitate the entry of new players into the market (particularly smaller ones).

However, like the EU report, the CMA report highlights the use of wide/narrow parity clauses, within agreements between DTC and suppliers, requiring suppliers to set a price on a DCT which is no higher than the price offered through their own site, or through their own website and on any other DCT.

The CMA also reports other competition issues such as key word bidding restrictions in agreements, by which DCTs and suppliers agree to not bid on each other’s brand names and/or relevant key words for search engine results, or non-resolicitation agreements, by which a DCT may not contact a consumer who has purchased a supplier’s product from that DCT for a specified period.

Finally, concerns were raised about the commercial power that suppliers hold and the ability they have to withhold data. Indeed, by holding data, suppliers weaken the DCT’s effectiveness as a comparison tool. This issue forms a key part of the CMA’s ongoing consultation and the CMA is considering remedies.

The CMA will however not conduct a more in-depth market investigation, considering that it has all the tools it needs to address the problems it has identified. It is taking comments and views on its preliminary findings report until 17:00 on 24 April 2017 in view to publish its final report (including the action it intends to take) on or before 28 September 2017.