January 24, 2022

Volume XII, Number 24

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January 24, 2022

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Narrow Best-Price Clauses Between Platforms and Hotels: German Federal Court of Justice Overturns Court Decision that Ruled These Permissible Under Antitrust Rules

The German Federal Court of Justice (Bundesgerichtshof (BGH)) has recently published on 6 August 2021 the reasoning for its judgment of 18 May 2021 on best-price clauses, which overturned the previous decision of the Düsseldorf Higher Regional Court (Oberlandesgericht (OLG)). According to the reasoning of the BGH, Internet booking platforms that exceed the market share threshold of 30% are not allowed to prohibit hotel operators from offering accommodations at a lower price or on better terms on the hotel´s own website than on the platform’s website.

BACKGROUND

On 20 December 2013, the German Federal Cartel Office (Bundeskartellamt (FCO)) announced proceedings against the online hotel booking platform Booking.com with regard to extensive parity clauses (so-called “wide” best-price clauses), which prevented hotel operators from offering lower hotel prices, better booking, and cancellation conditions or terms of availability on websites of third parties, on the hotels’ own website, or offline through any other distribution channels. 

In response to the investigation, Booking.com agreed on 25 June 2015 to refrain from the abovementioned wide best-price clauses, but it insisted on so-called “narrow” best-price clauses, which only prohibit better conditions on the hotel’s own website but allow for competition by other platforms or offline distribution. The FCO, however, ruled in December 2016 that the narrow best-price clauses violate antitrust law and prohibited their use from 1 February 2016 onwards. 

An appeal by Booking.com against the decision of the FCO concluded with the judgment of the OLG Düsseldorf of 4 June 2019 (case no. VI-Kart 2/16 (V)) in which the court annulled the deviating decision of the FCO and decided that narrow best-price clauses do not violate antitrust law and may therefore be used. The court’s reasoning was that the clauses are necessary to ensure a fair and balanced exchange of services between the platform operators and the contracted hotels. 

DECISION OF THE COURT 

As the OLGDüsseldorf has not allowed an appeal to the BGH, the FCO challenged the decision by way of a nonadmission complaint. The complaint was admitted by the BGH. 

In its judgment of 18 May 2021 (case no. KVR 54/20), the BGH decided that narrow best-price clauses violate antitrust law and that Booking.com is not allowed to prohibit hotel operators from offering accommodations at a lower price or on better terms on the hotel´s own website than on the platform’s website. The court found that the clauses restrict competition with regard to the offering of hotel rooms and are not necessary to ensure a fair and balanced exchange of services between the platform operators and the contracted hotels.

While the BGH acknowledged the possibility of a “free-rider problem” of hotel operators using the platforms to divert consumers from the platform's website to the hotel website by lower room prices or better contract terms, it deemed this reasoning as not sufficient to constitute an indispensable prerequisite for enabling the proper fulfillment of the contracts between Internet booking platforms and hotels. Furthermore, the BGH ruled undeniable efficiency gains associated with hotel booking platforms do not justify restrictions of competition caused by narrow best-price clauses, as again, the restrictions of competition were not deemed to be indispensable to attain these efficiency gains.

It is noteworthy however, that the BGH explicitly did not rule out the possibility that narrow best-price clauses might constitute a vertical agreement that falls under the scope of the exemption provided for in Article 2 General Vertical Block Exemption Regulation (Commission Regulation (EU) No 330/2010, “VBER”) and therefore be permitted if certain conditions are met. It also stated that narrow best-price clauses, although being similar to minimum price specifications, do not constitute a hardcore restriction as provided for in Article 4 (a) VBER. In the present decision the BGH did not consider whether the vertical block exemption applied to narrow best-price clauses for the reason that the market share of Booking.com exceeded the threshold of 30% of the relevant market provided for in Article 3 (1) VBER.

WHAT IS NEXT?

Narrow best-price clauses remain a matter that continues to cause controversy among national competition authorities and legislators in Europe, with some countries like France, Italy, and Austria having prohibited by law the use of best-price clauses, while in Ireland and Sweden, for instance, national competition authorities accepted the continuing use of narrow best-price clauses as a commitment by Booking.com.

With the new ruling, the BGH has clarified that Internet booking platforms are prohibited from using narrow best-price clauses, at least if they exceed the market share threshold of 30% provided for by the General Vertical Block Exemption Regulation. There remains, however, the possibility that narrow best-price clauses may be permissible under the VBER if booking platforms using them do not exceed a market share threshold of 30%, a position currently also adhered to by the European Commission ("Commission"). As for the ongoing revision process of the VBER launched by the Commission, it remains uncertain if this will uphold in the near future, with most-favored-nation clauses (MFN), especially in the hotel online booking sector, being one of the points under close scrutiny by the Commission. Among the possible solutions, the Commission is considering whether to exclude certain types of sales channels from the exemption of MFN clauses or whether to exclude MFN clauses as a whole from the block exemption and instead require an effects-based assessment.

Jennifer P.M. MarshGabriela R. Da CostaAlexander Rospert also contributed to this article.

Copyright 2022 K & L GatesNational Law Review, Volume XI, Number 237
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About this Author

Dr. Annette Mutschler-Siebert, M. Jur. (Oxon), Public Procurement Attorney, EU Antitrust Lawyer, KL Gates Law firm
Partner

Dr. Annette Mutschler-Siebert is a partner in the firm’s Berlin office. She advises clients on public procurement law as well as European and competition law. She is particularly experienced in advising clients on the design of and participation in complex procurement procedures, privatization projects and public private partnerships for both the bidding and the contracting party.

Dr. Annette Mutschler-Siebert also advises clients on issues relating to antitrust law, in particular the structuring of distribution networks, the structuring of...

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Philip Torbøl, KL Gates, cartel investigations lawyer, merger control attorney
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Philip Torbøl is a founding partner of the firm’s Brussels office. His practice focuses on EU competition law and government strategies.

Mr. Torbøl’s competition experience includes advising clients in matters related to the conduct of dominant companies, cartel investigations, merger control, and state aid.  In addition to defending clients before European institutions, Mr. Torbøl’s practice focuses on helping companies define their distribution strategies within the framework of EU competition law – not only preventively, but also to ensure...

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Francesco Carloni, KL Gates, EU merger control attorney, dominant position abuse lawyer
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As a European and Italian competition law practitioner, Mr. Carloni’s experience primarily lies in the field of merger control, , restrictive practices and agreements, e-commerce, abuse of dominant position, EU sector inquiries, public consultations, and state aid. He offers compliance training and develops customized compliance programs adapted to clients' specific risk profiles. He...

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Mélanie Bruneau Regulatory Compliance Attorney
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Mélanie Bruneau is a partner in the firm’s Brussels office. She advises on a broad range of areas in European Law. Her practice focuses on advising clients in a variety of industrial sectors, including transport, manufacturing, chemicals and IT, on the legal aspects of their business activities, with a particular emphasis on regulatory compliance. 

Ms. Bruneau advises large multinationals on all aspects of EU competition law. She has significant experience in cartel investigations. Ms. Bruneau was also involved in the first cartel settlement and in the first hybrid cartel settlement...

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Jens Steger Partner Attorney International Antitrust Compliance K&L Gates LLP
Partner

Jens Steger has been advising on international antitrust and competition law as well as antitrust compliance for several years. He and his team focus on antitrust litigation, both on the plaintiff’s as well as the defendant’s side, usually in follow-on damage litigation cases.

He also advises and represents clients in merger control proceedings before the German Federal Cartel Office and the European Commission, as well as coordinates international merger cases, which require notification to various global authorities.

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