Even “narrow” best price clauses are not narrow enough

“Narrow” best price clauses as restraints of competition

Booking.com operated a clause, that prohibited participating hotels from offering their rooms on their own website at lower prices or other more favourable conditions than on Booking.com (“narrow” best price clause). However, Booking.com did not restrict participating hotels from offering rooms at lower prices on competing online booking portals or offline without online advertisement (like it would be the case under a “wide” best price clause).

The German Federal Cartel Office (“FCO”), the Higher Regional Court of Düsseldorf and the FCJ unanimously consider the clause to be restrictive of competition. Hotel operators are deprived of the obvious opportunity to pass on the commission, they save by using their own online sales channels, in the form of price reductions and thus to attract customers. Furthermore, there is no incentive to use the option of offering rooms at a lower price on another hotel portal. Since the room price on the hotel's own online sales channels must be at least as expensive as on Booking.com, it would necessarily be more expensive than on the hotel portal where the lower price would be set. In fact, an online minimum price is set by the parties involved, as the Higher Regional Court of Düsseldorf put it.

Ancillary restraint

There is disagreement, however, whether “narrow” best price clauses as an ancillary restraint are directly related and necessary to carry out the platform contract and thus fall outside Article 101 (1) TFEU.

The Higher Regional Court of Düsseldorf had lifted the FCO’s prohibition of the use of the clause by decision of June 4, 2019. It held that the balanced exchange of services would be disturbed if the hotels would make use of Booking’s intermediary services without consideration by diverting the hotel customers who have decided on their hotel using Booking.com to the hotel's own website by offering a lower room rate or other more favourable contractual conditions. Therefore, according to the court the “narrow” best price clauses fell outside the cartel prohibition of Article 101 (1) TFEU. The decision can be found here.

The FCJ reversed the decision by the Higher Regional Court of Düsseldorf, holding that, according to the structure of Article 101 TFEU, pro-competitive aspects, such as securing an appropriate remuneration for the platform service or increased market transparency for consumers, could only be taken into account with regard to an exemption pursuant to paragraph 3 of this provision. To fall outside Article 101 (1) TFEU the best price clauses would have to be directly related and objectively necessary to carry out the platform contract. The FCJ referred to the investigations conducted by the FCO at the instigation of the Higher Regional Court of Düsseldorf. Booking.com had been able to further strengthen its market position in Germany according to all relevant parameters since the prohibition of the use of the “narrow” best price clause as of February 1, 2016. Thus, the FCJ concluded the use of this clause could not be objectively necessary to carry out the platform contract. The press release can be found here.

Exemption, Article 101 (3) TFEU

The EU Vertical Block Exemption Regulation did not apply because Booking.com's market share on the relevant market of hotel booking platforms in Germany is more than 30%.

Because efficiencies emanating from hotel booking platforms do not require the narrow best price clause, the FCJ held, its use could not be exempted under Article 101 (3) TFEU.

This decision has clarified the long-standing dispute as to whether a best-price clause, narrow or broad, is impermissible. However, it is questionable to what extent this decision is also applicable in other areas, as it is strongly influenced by the platform economy. Furthermore, in most cases the market share is below 30% so that the Vertical Block Exemption Regulation is applicable.

For more information please contact Dr. Stephan Waldheim and Maren Steiert.