Competition authorities consult on online travel agents' pricing practices
Author: Simon Barnes
Applies to: European Union
Working in collaboration with other competition authorities across Europe, the Competition and Markets Authority (CMA) has launched a consultation on the pricing practices of online travel agents (OTAs) such as Booking.com and Expedia.
The consultation, which takes the form of a questionnaire targeted at hotels, seeks to establish whether efforts made to promote competition in the hotel bookings sector has been a success. The feedback that the authorities receive now could determine whether they conduct further investigations into the practice of the large OTAs.
OTAs' pricing practices have been subject to intense competition scrutiny across Europe over the past few years. Investigations by the competition authorities have led to Booking.com and Expedia agreeing to water down the scope of their 'price parity' (or 'most favoured nations') clauses that restrict hotels from offering better terms through other sales channels. The CMA, working in collaboration with the European Commission and nine other national competition authorities, now wants to establish what impact those changes have had.
Price parity provisions have been a controversial subject in the hotel sector for some time. OTAs argue that such provisions ensure that they can offer the lowest prices to consumers. However, detractors argue that price parity provisions restrict hotels' ability to offer lower prices, that they establish a floor price for hotel rooms and that they stifle innovation in the OTA sector.
To date, the competition authorities' approach to reviewing price parity provisions has been somewhat piecemeal. Investigations have been conducted by the national competition authorities in the UK, Denmark, France, Germany, Greece, Italy, Poland, Switzerland and Sweden.
For its part, the UK competition authority's involvement has been somewhat chequered. In September 2010, the Office of Fair Trading (which was the CMA's predecessor) launched an investigation, which it concluded in January 2014 by accepting commitments offered by Booking.com and Expedia that were intended to enhance online travel agents' ability to discount hotel room rates. However, that decision was successfully challenged on appeal by Skyscanner and Skoosh. The Competition Appeal Tribunal sent the matter back to the CMA which, in September 2015, decided not to pursue it further.
Arguably the most successful interventions to date have been by the French, Italian and Swedish competition authorities, which joined forces in accepting a settlement with Booking.com. Booking.com agreed to water down the terms of its price parity provisions across Europe. More recently, Expedia has followed suit.
The CMA's questionnaire (which is replicated by the other national competition authorities involved in this initiative) seeks to establish whether the watering down of price parity clauses has had any effect on the market. The results will inform a decision whether any further regulatory action is required.
The CMA says that it has contacted a 'large sample' of hotels in the UK directly, but it offers an open invitation to other hotels also to complete its questionnaire. The deadline for responding is Monday 8 August 2016.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.