On 2 April 2015, the German Federal Cartel Office (the “FCO” or “Bundeskartellamt”) issued a statement of objections to booking.com regarding its best price clauses. Best price/price parity/most favoured nation clauses, are clauses in agreements whereby one party promises another to always offer its best rates or terms for a product or service. The fear over these obligations is that although they seem favourable to consumers, the effect in practice is for this fixed lowest price to become a minimum price granted to one website. Other websites are unable to better it and the consumer is worse off as a result.
We have reported on the advance of regulators against the use of these clauses in hotel booking several times over the last two years including in this post from December on a pan-European movement against them.
What is significant about the latest development in Germany is the fact that German FCO seems to be moving towards a position where the use of these clauses is likely to be challenged when used by companies who are dominant in their sector. This is following parallel proceedings against booking.com competitor HRS, where such clauses were prohibited by the FCO. The FCO is of the opinion that given this prohibition against HRS, Booking.com as the dominant provider should follow suit in abandoning the use of these clauses.
This latest statement of objections puts booking.com and similar businesses in a precarious position. Their success is dependent on the fact that they offer consumers a one-stop-shop for their services, whether it be hotel booking or car insurance, and their dominance of the market is as a result of the confidence and convenience to the consumer of having all the lowest prices on one website. Consumers may be dismayed to know the FCO’s movements against booking.com and others will have the effect of making consumers search across multiple platforms to find the lowest price, even if prices do lower in the long term as new entrants are theoretically able to enter the market as a result of the prohibition of these clauses for dominant players.
Of course these moves by regulators could have little effect if consumers now prefer the familiarity and infrastructure of these dominant players and choose to stick with them as their first and only port of call for online purchasing of this kind.
The current FCO proceedings against rival Expedia in Germany will continue in the meantime. In perhaps a slightly ominous end note to their press release found here, the FCO indicate that they may have the support of the EU Commission in pursuing their cases against the dominant hotel booking operators, signalling very much the start of an EU wide move against their best price clauses.