European Court rules Booking dot com’s price parity clauses may restrict competition

The European Court of Justice (ECJ) ruled on Thursday that Booking dot com has potentially restricted competition by imposing price parity clauses in its contracts with hotels. These clauses require hotels to maintain the same pricing on Booking dot com as they do on their websites and other competing platforms.

The court’s decision comes in the wake of varying regulatory approaches within Europe. While Germany’s competition regulator had already banned such practices across both hotel and digital competitor websites, the European Commission had previously restricted its ban to hotels only.

Germany’s antitrust watchdog has banned such clauses whether they apply to hotels’ websites or rival accommodation sites while regulators for the EU as a whole allow such curbs only for hotels’ own sites.

Landmark rules known as the Digital Markets Act that came into force last year ban large online platforms, which would include Booking dot com, from using wide or narrow retail parity clauses or equivalent commercial measures.

The European law on digital markets forbids major internet platforms from enforcing contractual provisions that mandate price parity or similar measures. The ECJ found that Booking dot com had failed to demonstrate that these price parity clauses were necessary or proportionate for achieving its primary business objectives. The court stated, “It has not been proven that price parity clauses, whether broadly or narrowly defined, are objectively necessary to achieve the main business objective, nor are they proportionate to the objective they seek to achieve.”

These clauses are part of a broader category of restrictive contractual terms that also include prohibitions on mutual competition and exclusive procurement agreements, which can infringe upon market competition regulations. The EU permits such clauses only when they are deemed limited and essential for reaching an economic goal.

The ECJ’s ruling indicates that Booking dot com’s price parity clauses could potentially stifle competition among digital platforms and hinder smaller or newer market entrants. However, the court also noted that these provisions do not necessarily violate regulations concerning equal market competition.

In response to the verdict, Booking Holdings expressed disappointment, asserting that the parity clauses were necessary and proportionate for managing relationships with accommodation partners. The company emphasized that it operates within a competitive market.