Open All Hours: Competition Law And The Hotel Sector (Part 1)

• Published date: 09 August 2023
• Subject Matter: Antitrust/Competition Law, Media, Telecoms, IT, Entertainment, Antitrust, EU Competition , Hotels & Hospitality
• Law Firm: Bird & Bird
• Author: Ariane Le Strat, Saskia King and Karen Friebe

EU and UK competition law is an often underestimated and misunderstood area of law. However, it very much applies to the hotel sector which in recent years has been subject to increased scrutiny. Businesses that fail to comply with these laws could face significant fines, reputational damage and more, which is why being able to spot the red flags is crucial. In this new three-part series, we highlight some of the competition law issues applicable to the hotel sector and how businesses can navigate these hazards.

In this first alert for our readers, we provide an overview of the common restrictions captured by the prohibition of anticompetitive agreements set out in Chapter 1 of Competition Act 1998 and Art 101 TFEU. The second alert will take a close look at information exchange and, lastly, we will turn to the prohibition of abuse of dominance set out in Chapter 2 of the Competition Act 1998.

Anti-competitive agreements

1. Most favoured nation (MFN)/retail parity clauses in agreements with Online Travel Agencies (OTAs)

Much of the competition case law around hotels in the past few years has been in relation to MFN clauses, which are in essence retail parity clauses contained in agreements with OTAs.

What is an MFN clause? MFN clauses (also known as 'retail parity provisions' or 'price parity provisions') can take many forms. They all have in common a supplier agreeing to offer a customer, terms as favourable as, or no less favourable than, those offered to other customers. MFNs are one of the most common competition law pressure points in the hotel sector, especially when dealing with online travel agents (OTAs). MFNs relating to price have been the main focus of investigations by competition authorities as, on balance, they are more likely to restrict competition than those relating to other conditions of business. In competition law terms an important distinction is made between 'wide' and 'narrow' MFNs: Wide MFNs are agreements between a marketplace (for example an OTA) and a retailer (for example a hotel), typically requiring a retailer to publish on a marketplace the same or better price and conditions as those published on any other sales channel, i.e. the OTA prevents the hotel from offering a better rate to another OTA. Narrow MFNs typically require a retailer to publish on a marketplace the same or better price and conditions as those published on its own (direct) website, i.e. the retailer is prevented from offering a better deal on its own...