In civil proceedings between Booking.com and a group of German hoteliers the Amsterdam district court must rule on the question whether Booking.com has acted unlawfully by including in its general terms and conditions 'broad' parity clauses until 1 July 2015, and 'narrow' parity clauses from 1 July 2015 to 1 February 2016. Parity clauses prevent hoteliers from offering better terms outside the Booking.com platform; not on their own hotel websites (narrow) or on other booking platforms (broad).
Booking.com is claiming a declaratory judgment that it has not acted unlawfully by applying such parity clauses. By their counterclaim, the hotels are seeking a declaratory judgment that Booking.com has infringed European competition law (Article 101(1) TFEU) and thus acted unlawfully.
Booking.com argues that the broad and narrow parity clauses are an ancillary restraint because the agreements between Booking.com and the hotels have positive – at least neutral – effects on competition and the parity clauses are inherent to and necessary for Booking's services. According to Booking.com, its parity clauses prevent hotels from unfairly using Booking.com's services without paying for them (free riding). Without parity clauses, travellers and accommodations would benefit from Booking.com's investments in the platform's search and compare functions, while Booking.com would not be able to recoup its investments.
The hotels dispute that the broad and narrow parity clauses are ancillary restrictions. The narrow parity clause is not indispensable as its abolition in 2016 has had no noticeable adverse effect on Booking.com's business, the hotels claim. Moreover, according to the hotels, Booking.com has not demonstrated that there are no less drastic ways to solve the free riding problem and research carried out by the BKA on behalf of the OLG Düsseldorf shows that the risk of free riding is (very) small.
If the parity clauses of Booking.com do not qualify as an ancillary restraint, the next question to be answered is whether the parity clauses constitute an appreciable infringement of Article 101(1) TFEU. For answering that question, it is necessary to define the relevant market. The scope of the applicable relevant market also divides the parties.
In summary, Booking.com states that the relevant market is the market for the booking and distribution of travel accommodations. In that context, it is essential that Booking.com is a two-sided platform. For both hotels and travellers, the various distribution channels (online and offline) are substitutable and therefore form a single market, according to Booking.com.
Briefly summarized, the hotels argue that a separate (German) market for online travel agency platform (‘OTAs’) should be assumed, because only the hotel booking portals offer the combination of search, compare and book. According to the hotels, the online distribution of hotel rooms is not substitutable with the offline distribution.
In its ruling of 22 February 2023, the Amsterdam district court notes that opinions are divided on the question of whether a parity clause is excluded as an ancillary restraint from the scope of the cartel prohibition of Article 101(1) TFEU.
The court further notes that in the light of developments in European competition law, there is a lack of clarity about the method of market definition in the context of Article 101(1) TFEU. In view of the objective of the TFEU to guarantee uniform application of the TFEU, the court considers it necessary to submit the following preliminary questions to the CJEU.
- Can a broad and narrow parity clause in the context of Article 101(1) TFEU be regarded as an ancillary restraint?
- In the application of Regulation (EU) 330/2010, how should the relevant market be defined when transactions are brokered by an OTA where accommodations can offer rooms and come into contact with travellers who book a room via the platform?
This is a case to keep an eye on. The outcome is of great importance, not only for the parallel case pending before the Berlin Regional Court, involving over 2,600 accommodation providers, but also more in general for the application of EU competition law to online platforms.
If the CJEU rules that parity clauses can be ancillary restraints, it will not only affect hotel booking sites and hotels, but basically all online platforms and the companies and consumers using them. The same applies to the requested guidance regarding the market definition of online travel agency platforms.