The Danish Competition and Consumer Authority (DCCA) ceases their investigation of the hotel booking portals following the latest EU developments. DCCA started the investigation after an inquiry in July 2014.
The matter concerns the so-called “most favoured nation” clauses or MFN clauses. MFN-clauses are price clauses, whereby a company is obligated to always offer its best price for a product or service to the contracting party. The price clauses are common in a wide range of commercial agreements and have been widely used in hotel booking portals’ standard trade agreements with hotels. During the recent years, these trade agreements have been subject to the national competition authorities’ investigations in several EU countries.
The competition concern is that the clauses reduces the competition between the booking portals by freezing the prices and creating entry barriers for new competitors. For instance because new competitors cannot get better price offers from the hotels, even though they offer the hotels a lower commission for selling via the portal or other more favourable conditions, than offered by the established booking portals.
The German competition authorities found Hotel Reservation Services’ (HRS) MFN clause illegal as early as December 2013. This case was finally settled in the court of appeal in January 2015. In April 2015, Booking.com made commitments to the competition authorities in France, Sweden and Italy to remove the MFN clauses from their trade agreements. Prior to this, the commitments where market-tested by the Commission on behalf of the national authorities. Booking.com has declared that the change will include all their trade agreements with hotels on EU level. On 1 July 2015, Expedia declared in a press release that they too will remove the MFN clauses from their trade agreements worldwide in line with the conditions of the commitments made by Booking.com.
Consequently, the developments in the national investigations in other EU countries has also influenced the portals’ agreements on the Danish market. It is this development, which had led to the DCCA’s expected discontinuation of the investigations. The authority is now carrying out a market hearing, and based on this they will make the final decision in mid-August. A similar approach may very well be the conclusion from other national authorities carrying out parallel investigations.
The cases have raised awareness of the MFN clauses and the restraint of competition, which the clauses may led to. Companies using MFN clauses in their trade agreements should consider, whether their clauses can have a similar anti-competitive effect.
The Danish Competition and Consumer Authority’s press release (in Danish) is published here.