German Federal Cartel Office bans use of MFN clauses by HRS and opens new proceedings against and Expedia

On 20 December 2013, Germany’s Federal Cartel Office (“FCO”) issued a press release concerning its decision to prohibit the hotel booking portal HRS from continuing to apply its “best price” clause (Most Favored Nation clause) and ordered the company to delete it from its contracts and general terms and conditions by 1 March 2014 as far as the clause affects hotels in Germany.

On 25 July 2013, the FCO revised the statement of objections sent to HRS based on concerns that the company was violating European competition law (besides the German Act against Restraints of Competition) insofar as HRS obliged hotels to always offer their lowest room price, maximum room capacity and most favorable booking and cancellation conditions available on the Internet via the HRS booking portal. At some point, hotels have also been prohibited from offering travelers better conditions if they booked directly at the hotel’s reception desk.

Andreas Mundt, President of the FCO stressed that the clauses at stake concern an essential issue for internet business via platforms, noting that best price clauses only seem to be to the benefit of consumers, but in reality “…they hinder competition for better offers between the portals by virtually eliminating competition for lower room prices between the hotel booking portals in Germany and “…make the market entry of new suppliers … more difficult as these new competitors are not able to offer hotel rooms at better rates.” Mund also observed that “…competition between the hotels is also hindered because they are not free to set their prices independently and cannot respond flexibly to new competition developments.

The FCO has now opened proceedings against and Expedia because the contracts concluded by these companies with hotel partners contain similar clauses.