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Fachgruppentag DAJV 2014 ARIM Fachgruppe

Fachgruppentag DAJV 2014 ARIM Fachgruppe. Parity Clauses between Hotels and Online Portals - The HRS Test Case in Germany-. Christa Pfeil-Kammerer. Agenda 1. How did the case start off? 2. Why only HRS in 2010? 3. Scope and enforcement of parity clauses 4. Market definition

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Fachgruppentag DAJV 2014 ARIM Fachgruppe

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  1. Fachgruppentag DAJV 2014ARIM Fachgruppe Parity Clauses between Hotels and Online Portals - The HRS Test Case in Germany- Christa Pfeil-Kammerer Bundeskartellamt

  2. Agenda 1. Howdidthecasestart off? 2. Whyonly HRS in 2010? 3. Scopeandenforcementofparityclauses 4. Market definition 5. Theoryofharm 6. Legal assessment: Art. 101 (1) TFEU andquestionofvertical block exemption 7. ConditionsforwithdrawingthebenefitsoftheVertical Block Exemption Regulation 8. State ofplay Bundeskartellamt

  3. The HRS Test Case in Germany 1. Howdidthecasestart off? _____________________________________________________ • In 2010, HRS extendedthealreadyexistingparityobligationsandthesanctions in caseof non-complianceandatthe same time HRS raisedthecommissionforbookingsfrom 13% to 15%. • Initially a singlehotelcomplainedaboutthesechanges, in thecourseof time othersjoined. • In 2011 a civillawsuit was filedby a newcomerplatformagainsttheparityclauses - in 2012 thisledto an interiminjunctionbythecourtobliging HRS tosuspendtheparityclausesforthedurationoftheproceedings. • HRS accepted a similar (informal) commitmentvis à visthe Bundeskartellamt forthedurationofthecase. Bundeskartellamt

  4. The HRS Test Case in Germany 2. Whyonly HRS in 2010? ______________________________________________________ • Attheoutsetofthecase HRS was byfarthestrongest online portal in Germany. • Even though all large portals (HRS, Booking, Expedia) haveparityclauseshotelsmainlycomplainedabout HRS since HRS veryactivelyenforcedtheseclauses. • As otherportalshavegainedstrongermarketpositions HRS is still theportalresponsibleforthelargestnumberof online bookingsforhotelrooms in Germany. • Dependencyofhotelsis still strong becauseoftheoverallmarketpositionandthe HRS strategytoofferservicestofirmsneedinghotelroomsfortheirbusinesstravels. Bundeskartellamt

  5. The HRS Test Case in Germany 3. Scope and enforcement of parity clauses_____________________________________________________ Scope • Price parity • Parity on conditions for booking and cancellation • Parity on room availability • Parity on all distribution channels including the hotel reception desk Enforcement • „Crawler“ for searching the internet for hotel price differences. • Hotels receive e-mails with lists on price differences to the detriment of the online portal using parity clauses and hotels are advised to eliminate price differences. • Insistent telephone calls by hotel portal employees lead to hotels renouncing their price policy. • Contract terminations by hotel portals without any reasons being given. Bundeskartellamt

  6. The HRS Test Case in Germany 4. Market definition Product Market • Hotel portalscombiningthefunctionalitiesofsearching, comparingandbookingofhotelrooms in onehand. Geografic Market no larger than national: • National presencenecessary in order toattractlocal/regional hotelsandtomaintainbusinessrelationships. • Portals investstronlgly in national advertising. • Cooperationwithnationally well-knownmarketingpartners in thetravelindustry. • Byfarthelargestgroupofcustomersbookinghotelrooms in Germany are German residents. Bundeskartellamt

  7. The HRS Test Case in Germany 5. Theoryofharm ____________________________________________ • Parityclauses hinder competitionamonghotelportalsforlowerroompricesto end customersandforlowercommissionstohotels. • Theyimpedemarketentryofnewportalsofferingsimilaror innovative services (such as last minuteoffers via smartphone) ashotelscannot pass on lowercommisssionstoconsumers. • Due tofailingflexibilityofhotelsparityclauses also reducecompetitionamonghotels. Bundeskartellamt

  8. The HRS Test Case in Germany 6. Legal assessment – Art. 101 (1) TFEU _________________________________________________ • Competitionlawisapplicabletocontractsbetweenportalsandhotelsbecausehotels do not instructportalsandportalstaketheirownmarketdecisions. Nevertheless, HRS is an agent, not a reseller. • Ourview: Parityclausesarerestrictionsbyobjectwithinthemeaningof Art. 101 (1) TFEU. Bytheirverynaturetheyhavethe potential ofrestrictingcompetition. However, wedid not decide on thisissueandshowedtheeffects. • Ourview: TakingtheVertical Block Exemption Regulation (VBER) literally, parityclausesare not a hardcorerestrictionwithinthemeaningof Art. 4 a) VBER. However, themarketeffectsoftheseclausesareverymuchcomparable. Wedid not decide on thisissuethoughandshowedtheeffects. Bundeskartellamt

  9. The HRS Test Case in Germany (2013) 6. Legal assessment – questionofvertical block exemption • Market Shares havetobecalculated on thebasisofmarketsalesdata. • Art. 3 (1) VBER: HRS exceededthe 30% („safeharbour“)-threshold in 2011. • As wewere still waitingfordatafor 2012, wechoose a twofoldapproach: • Individual exemptionassessment in case HRS continuedtoexceed 30% in 2012. • Withdrawalofthebenefitsofthe Block Exemption Regulation in case HRS fellbeneath 30% in 2012. Bundeskartellamt

  10. The HRS Test Case in Germany 7. ConditionsforwithdrawingthebenefitsoftheVertical Block Exemption Regulation • Ifthe German Cartel Office intendedtowithdrawthebenefitsofthe Block Exemptionfor HRS itwouldhavetoshowthefollowing: • The affectedmarketisno larger than national in scope (Art. 29 [2] Reg 1/03). • Helpful (see Art. 6 VBER): Parityclauses form partof a networkofsimilarverticalrestraints [HRS, Bookingand Expedia which all haveparityclauses in hotelcontracts cover about 90% ofthe German hotelportalmarket]. • The exemptionconditions in Art. 101 (3) TFEU are not fulfilledfor HRS individually. Bundeskartellamt

  11. The HRS Test Case in Germany 8. State ofplay ______________________________________________________ • Final decision HRS Dec. 20, 2013 - declaringthattheparityclauses [„bestpriceclauses“] are not compatiblewith Art. 101 TFEU (andthe relevant national law), - requesting HRS todeletethebestpriceclauses in contractsbetween HRS andhotels in Germany asof 1st March 2014, - prohibitingthefurtherapplicationofthebestpriceclausesby HRS. Since HRS exceededthe 30% VBER-threshold („safeharbour“) in 2012 wedid not withdrawthebenefitsoftheVertical Block Exemption Regulation. • HRS: Appeal tothe Court of Appeal in Düsseldorf on January 17, 2014. Start ofproceedingsagainstBookingand Expedia Dec. 19, 2013 Bundeskartellamt

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