On August 26, 2022, the Commission published the results of an external market study on the distribution practices of hotels in the EU, with a particular focus on parity clauses.[1] The study was conducted in 2021, after several years of close scrutiny by national competition authorities,[2] as well as the introduction of national legislation restricting the use of such clauses in several Member States.[3]
Parity clauses are applied by hotel booking platforms, and prevent listed suppliers from offering lower prices or better terms on other platforms. More specifically:
- Wide parity clauses compel hotels to grant an online travel agency (“OTA”) the lowest room price and the best room availability compared to all other sales channels.
- Narrow parity clauses allow hotels to offer better prices and availabilities on competing OTA services, but prevent them from offering better conditions through the hotel’s own website.
The European Competition Network (“ECN”) had previously monitored the bookings sector in 2016.[4] The 2021 study provides an update based on 2017– 2021 data and assesses the impact of the Austrian and Belgian prohibitions against parity clauses.
The new study found that, compared to 2016 figures, the prices and availabilities hotels offered: (i) across different OTAs; and (ii) on the hotels’ own websites and via OTAs had converged. The study found no significant differences in the sample between Austria and Belgium (which introduced legislation prohibiting parity clauses) and the other Member States that had not introduced such legislation. The results of the study indicate that, even absent contractual obligations, OTAs may incentivize price parity through the use of indirect incentives—such as algorithms that rank hotels less favorably when they offer better prices elsewhere than on the platform.
[1] The full study is available at: https://competition-policy.ec.europa.eu/system/files/2022-09/kd0722783enn_hotel_accomodation_market_study.pdf.
[2] Parity clauses were recently scrutinized, with divergent outcomes, by national authorities in, among others, Germany, as discussed in our July/August 2019 German Competition Law Newsletter, France, as discussed in our December 2019 French Competition Law Newsletter, Italy and Sweden.
[3] At the date of the study, France, Austria, Italy and Belgium have adopted laws prohibiting parity clauses in contracts between accommodation providers and online travel agencies.
[4] The ECN had found that 79% of the hotels did not price differentiate between OTAs, even after large OTAs such a Booking.com or Expedia switched from wide to narrow parity clauses. See ECN, Report On The Monitoring Exercise Carried Out In The Online Hotel Booking Sector By EU Competition Authorities In 2016.