Leading Online Travel Agency, Booking.com, gives Competition Law Commitment in regard to Pricing Offers on Hotels and other Accomodation in Ireland
Online travel agencies (known as “OTA”s) enable consumers to visit an OTA website to seek, compare and book rooms in various forms of accommodation (e.g., hotels, hostels and guest houses).
A number of competition agencies have expressed concern about such websites. This concern centres largely on the fact that such websites usually offer a guarantee to consumers that the website will offer the lowest price which means, in effect, that accommodation providers are prevented from offering lower prices to potential guests who approach them by other means (e.g., walk-in guests, telephone calls etc).
Commitments were obtained by competition agencies in France, Italy and Sweden in regard to the OTA site operated by Booking.com. Ireland has now joined those three agencies in securing commitments from Booking.com.
Ireland’s Competition and Consumer Protection Commission (“CCPC”) had concerns regarding pricing and availability obligations which Booking.com had placed on accommodation providers in Ireland. The clauses deployed are often known as “price parity” clauses. The CCPC stated that these clauses require hotels to guarantee that they would make their best rates available to Booking.com and that cheaper rates could not be found elsewhere. Indeed, where a consumer found a cheaper rate elsewhere than on Booking.com, the hotel was obliged to fund the cost of the Best Price Guarantee (i.e., the difference between the cheaper rate and the Booking.com rate). The CCPC stated that, in its view, price parity clauses restrict competition by dissuading market entry by new low-cost OTAs, by preventing hotels from discounting rooms which would otherwise lie empty (e.g. offering a cut-price room in response to a last-minute booking enquiry) and by dampening price competition between OTAs (because where multiple OTAs invoke price parity clauses, a hotel can only satisfy all these clauses by offering the same price on every OTA).
On 6 October 2015, the CCPC published details of commitments given to the CCPC by the Booking.com. The commitments apply for five years.
The CCPC believed that some aspects of the arrangements which Booking.com had with Irish hotels restricted price competition and risked infringing both Irish and EU competition law. In specific terms, Booking.com offered a “Best Price Guarantee”, whereby it guaranteed to match lower rates for the same room found elsewhere. The CCPC said, in announcing terms, while this may seem like a good deal for consumers, it was underpinned by a “Price Parity” agreement which prevented hotels hosted by Booking.com on its site from offering lower prices via other online travel agents, other marketing channels or directly to consumers. This meant that the “Best Price Guarantee” meant that the lowest price available to consumers was based, not on open competition across different channels, but on an underlying agreement not to undercut the Booking.com price.
Under the commitments given by Booking.com, accommodation providers in Ireland are able to offer cheaper rates through different online travel agents and to consumers who contact them directly. The CCPC stated in its press release announcing the commitments that “hotels in Ireland are now free to enter into alternative pricing arrangements with different OTAs, thereby facilitating price competition. Hotels will also be able to offer cheaper prices through other marketing channels, for example loyalty clubs and through direct contact with consumers who call, email or drop in.” Under the commitments, Booking.com may continue to offer a ‘Best Price Guarantee’ but it must now fund the cost of any claims under the Best Price Guarantee itself, rather than obliging the hotel to fund the cost.
The settlement is interesting in that the investigation covered a potential breach of Irish and EU competition law in that the investigation covered not only section 4 of Ireland’s Competition Act 2002 but also Article 101 of the Treaty on the Functioning of the European Union. What is less interesting is that the Irish CCPC seems to have indicated (according to the settlement terms) that if Booking.com offered commitments comparable to those offered elsewhere then that would resolve the CCPC’s concerns which proves that undertakings giving concerns to competition agencies should always keep an eye out to how such commitments would work in later investigations elsewhere because early commitments can set the tone for settling later investigations by other agencies.
The text of the commitments is available here.