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Best price clause of the HRS hotel booking portal violates antitrust law

Best price clause of the HRS hotel booking portal violates antitrust law

(Higher Regional Court in Düsseldorf, decision dated January 9, 2015 VI – Kart. 1/14 (V) [not yet legally binding])

The clause of a hotel booking portal holding a dominant position in the market that prohibits registered hotel operators from undercutting the room prices offered on the booking portal through other means is invalid.

With its decision of December 20, 2013, the Federal Cartel Office prohibited the Internet hotel booking portal HRS from using a so-called “Best Price Clause”. From 2006 the hotels under contract with HRS were forbidden to offer their rooms on more favorable terms than those on the HRS Internet portal. The clause covered both sales through other hotel booking portals and sales at the hotel itself.

The First Cartel Division of the Higher Regional Court in Düsseldorf has rejected the complaint lodged by HRS against the aforementioned decision, confirming the Federal Cartel Office in its view. The clause violates §1 of the Act Against Restraints of Competition (GWB) because it restricts competition not only between competing booking portals but also between the participating hotels. Competing booking portals are prevented by this clause from offering a better brokerage service than the hotels under contract with HRS, e.g. lower brokerage fees for a better room price than is offered on the HRS platform. The hotels under contract with HRS would be impaired in their competition with other hotels by having no option to offer their rooms at a better price.

Admittedly, a “best price clause” could be permissible as a so-called “most-favored clause”. However, this presupposes that both parties would have a market share of less than 30 percent or that the clause would prompt a significant gain in efficiency. Neither of these conditions, however, were present here. An exemption under the Vertical Block Exemption Regulation is also not possible.

Since several parallel proceedings are pending against other hotel portal providers and similar proceedings are underway in other European countries, the appeal on point of law to the German Federal Supreme Court has been allowed.

Practical effects
From the perspective of the consumer the decision is to be welcomed, as the “Best Price Clause” appears advantageous for hotel customers only at first sight. In fact, the customer gets the best, least-expensive room price that is on the market for that specific hotel. This price, however, under these circumstances, is higher than the price that could have offered when booking through the hotel itself or through a competing portal. This is because the commitment of the hotels to one specific portal obliges them to pay the commission calculated by that portal. The commission could, however, be lower through another and more efficient portal, and ultimately, the customers would benefit in the form of lower prices. New booking portals face greater difficulty entering the market because they cannot make better brokerage offers to hotels bound to the “Best Price Clause”, and they therefore cannot compete with HRS. Due to the concurrent obligation to offer rooms online, the hotels are unable to declare individual special rates, for instance to rent out all the rooms and to run the hotel at full capacity.

By dr. Dagmar Waldzus

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