The reason for these proceedings is a dispute between hotel booking site Booking.com and dozens of German hotels. Those hotels had entered into agreements with Booking.com that contained what is known as parity clauses. Such clauses prohibit hotels from offering better conditions elsewhere. This type of agreement is also known as most favoured nation (MFN) or best price clauses.
Initially, a ‘wide’ parity clause was involved, which prevented hotels from offering rooms at a lower price than on Booking.com not only on their own websites but also on competing booking sites. Under pressure from European competition authorities, Booking.com replaced this provision in 2015 with a ‘narrow’ parity clause that prohibited hotels from offering their rooms at a lower price only on their own websites.
In Germany, the competition authority fined Booking.com in 2015 for using the ‘narrow’ parity clause. This ruling was upheld by Germany’s highest court in 2021. A large group of hotel chains subsequently initiated an action for damages against Booking.com in Germany. Booking.com then in its turn instituted proceedings in the Netherlands seeking a declaratory judgment to the effect that the wide and narrow parity clauses that it used did not violate the cartel prohibition (Article 101 TFEU).
Opinions vary on the permissibility of parity clauses within the European Union. Both ‘wide’ and ‘narrow’ parity clauses are prohibited in Belgium, France, Italy and Austria, for instance. In many other countries, in principle, only ‘wide’ parity clauses are deemed likely to restrict competition unnecessarily. The European Commission also subscribes to that assessment. Article 5(1)(d) of the new Vertical Block Exemption Regulation, for instance, provides that ‘wide’ parity clauses may not benefit from the exemption from the cartel prohibition. ‘Narrow’ parity clauses are, however, exempt from the cartel prohibition, provided that the market share does not exceed 30%.
According to Booking.com, its ‘wide’ and ‘narrow’ parity clauses are what is known as ancillary restrictions, i.e. necessary in order for it to offer its search and comparison services. The Amsterdam Court found (ECLI:NL:RBAMS:2022:6812) that the European Court of Justice (ECJ) has not yet ruled on the question whether a parity clause constitutes an ancillary restriction. The Amsterdam Court is furthermore uncertain as to how the market should be defined.
The Amsterdam Court therefore intends to submit the following questions to the ECJ: (1) do the wide and narrow parity clauses constitute ancillary restraints under Article 101(1) TFEU; and (2) how should the relevant market be defined when applying Article 101(3) TFEU if one of the parties is an online hotel platform service?
Booking.com and the German hotels may now comment on this intention of the Amsterdam Court. The moment the ECJ rules that parity clauses may constitute ancillary restraints, that will affect not only hotel booking sites and hotels, but all online platforms and companies that use them. To be continued!
This blog was also published in the Snelrecht section of trade journal Mr. Online
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl
