Old friends in new frocks? MFN clauses in the online hotel booking sector/5

(All Episodes here).

At any rate, under the terms of the Final Commitments hotels will still be able to set room-only rates or “headline room rates,” while OTAs and hotels will be free to apply reductions (discounts, vouchers, cash back, etc.) off the headline rates. Those discounts, however, will not be offered to the mass of potential customers, but only to “closed group members,” for instance in the context of membership or loyalty schemes. This means that consumers will need to actively opt in in order to join the group, and membership will not be the result of some technological semi-automatism (such as a cookie dropped onto the customer’s computer) or implied behaviour interpreted broadly (e.g., registration with the OTA for booking management purposes). Moreover, in order to be eligible for the reduction, the customer will need to have made at least one prior undiscounted booking either with that specific OTA (in case of OTA’s discounts) or directly with that specific hotel (if the reduction is offered by the hotel). Finally, detailed restrictions relate to the ways in which OTAs and hotels circulate information regarding the availability of reductions. Communication regarding the specific level or extent of reductions offered by OTAs and hotels is restricted to “closed group members,” but OTAs will be free to openly publicise information regarding the general availability of reductions also to non-members, including to price comparison websites.

To the extent that the exercise of the newly granted discounting freedoms might be prevented by retail MFN clauses stipulated between IHG, Expedia, and Booking.com, the Final Commitments require the parties to the OFT’s investigation to amend those provisions. Moreover, the investigated parties must use “reasonable endeavours” to ensure that their current arrangements with other OTAs and other hotels do not contain provisions hampering those discounting freedoms, and are prevented from including such provisions in new arrangements. This means that retail MFN clauses should not be enforced against hotels in a way that prevents OTAs and the hotels themselves from offering discounts to their respective closed groups as covered by the Final Commitments. Those retail MFN provisions could still be enforced, however, in respect either of the offering of discounts to non-members or the publication of the details of such discounts outside of the closed group.

In sum, the Final Commitments would seem to endorse a level of minimum “retail” price fixing in the vertical relationship between hotels and OTAs to the extent that the room rates set by the hotels apply to the general public. Reductions off the headline room rates are reserved to “closed groups” under the terms of the settlement. It is also notable that only closed group members will be provided with detailed information concerning the specific level or extent of reductions offered by OTAs and hotels. Thus, for instance, consumers will be unlikely to find up-to-date, reliable information about the specific level of discounts offered by OTAs and hotels via price comparison websites or meta-search sites. In order to access that information consumers will have to join a number of “closed groups.” Furthermore, to be eligible for the discount, the consumer is required to have previously made an undiscounted booking with the same OTA or hotel.

(To be continued).