(Previous episodes here)
Still,
the protection of sunk and fixed cost investments, a generally accepted benefit
of many vertical restrictions, could potentially apply also to retail MFN clauses. In
the hotel online booking decision, the German competition authority discussed
at length whether the MFN clause employed by HRS, the investigated OTA, aimed
at protecting the investments required for a high-quality online booking offering,
such as a fruitful search experience, and the provision of extensive, and reliable,
information sources, by that promoting quality competition among OTAs. HRS made
the case that it invested heavily in producing a good-quality service in
order to attract customers, and that the employed retail-price MFN limited the diversion
of consumers from HRS’ platform to the hotels’ own websites and to other OTAs. If
consumers discovered that they could find cheaper hotel rates elsewhere, they
might still use the hotel search and other facilities developed by HRS but not
book the room through the HRS platform, by that undermining HRS’ and other OTAs incentives to
invest in quality competition among platforms.
Following detailed analysis, the
Bundeskartellamt was unconvinced by HRS' argument about the seriousness of the free-rider problem. First, the German competition authority noted
that only a very small amount of HRS’ investments goes into the promotion of single
hotels offerings; the largest part of HRS’ investments is devoted to the
promotion and the enhancement of the platform itself. In case consumers booked
hotel rooms directly via the hotels’ websites, the platform-specific investments
would not be significantly discouraged. The prohibition of retail MFN clauses
notwithstanding, the OTAs would continue investing in the quality of their services.
Moreover, the so-called billboard effect
(i.e. the additional reservations made through the hotel’s website after
inclusion in the OTA’s listing) is limited, especially due to the structure of
the hotel industry in Germany, where there are many small and medium
operators whose websites normally do not offer the same booking functionalities
and comfort available to consumers without charge on the HRS' platform (e.g. immediate booking). The
billboard effect in favour of the major hotel chains in the German market is also
bound to be relatively insignificant, in particular because consumers already tend
to seek out brand hotel chains’ websites directly.
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