German Federal Cartel Office determines “best price clause” as anticompetitive

February 2014 the German Federal Cartel Office („FCO“) published in its decision B9-66/10 the prohibition of the so-called most favoured treatment clause (“MFT-clause”) of the hotel provider HRS-Hotel Reservation Service Robert Ragge GmbH (“HRS”).

Hotel providers establish contracts with hotels in order to offer their rooms through own platforms to customers. Such contracts are usually concluded annually. Depending on the business model, the hotel can commit either to offer complete quotas including numbers, terms and prices of rooms, or set individually at any time by itself the amount and prices of available rooms. In the first case ultimately the hotel provider determines the end price for the customer while in the second case the hotel itself decides the actual sales-price of the room and pays the provider a fee for each realized booking.

The MFT-clause requires the hotel not to offer any better terms or prices to other hotel providers. Hence, HRS obliged hotels to offer their rooms on the platform for at least equally favorable rates and terms as offered to any other hotel providers or through other distribution channels.

Although hotels are not per se contractually obliged to attain themselves to a minimum or steady price, such clauses create a similar effect since hotels cannot offer more favorable prices to customers anywhere else and hotel providers will have a lack of incentive to offer more favorable fees to hotels. The effect of these clauses was European-wide.

The market concerned was defined as the market for hotel provider platforms at a national level. It is to be considered that different hotel providers for hotels are not substitutable but complementary and to be used adjacently.

In addition the FCO established that HRS cannot be regarded as a commercial agent, which would exclude a possible competition law infringement, since it carries its own risk and limits the price policy of the principal, which are the hotels itself, and not the other way around. A group or individual exemption under the Block Exemption Regulation was not considered due to high market shares above 30% and the anticompetitive nature of the clause.

Hence HRS had to remove their MFT-clauses of all valid contracts as well as from its general terms and conditions until 1 March 2014.

Authors:

Dr. Christina Hummer
Ori Kahn