Narrow parity clauses of Booking.com unlawful

The hotel booking portal Booking.com used so-called narrow parity clauses towards participating hotels in the past. The Federal Court of Justice (BGH) has now decided that these were incompatible with competition law.

The hotel booking portal Booking.com mediates direct bookings of hotel rooms. When a customer concluded a contract with the respective hotel, the portal operator received a performance-related commission. The terms and conditions of Booking.com provided in the past for so-called narrow parity clauses. According to these, it was forbidden for hotels to offer their rooms on their own website at lower prices or under better terms than on Booking.com.

What was, however, permitted was offering on other online booking portals or offline, provided that no online advertising took place for this purpose. The Federal Cartel Office established in this regard that such a clause infringes competition law. As a result, Booking.com was prohibited from further use as of 01.02.2016, which the hotel booking portal complied with.

In the context of an appeal by the hotel booking portal, the Higher Regional Court (OLG) Düsseldorf subsequently repealed the order of the Federal Cartel Office. It had taken the view that the narrow parity clauses did indeed restrict competition. However, as necessary ancillary agreements to the mediation contracts with the hotel enterprises, they were not subject to a cartel prohibition.

Against this decision of the Higher Regional Court (OLG) Düsseldorf, the Federal Cartel Office sued within the scope of an appeal to the Federal Court of Justice (BGH) for restoration of the original order.

BGH: Narrow parity clauses unlawful

The Cartel Senate of the Federal Court of Justice (BGH) (order of 18.05.2021, Az. KVR 54/20 – Press release) has set aside the decision of the Higher Regional Court (OLG) Düsseldorf and dismissed the appeal by Booking.com.

First, the judges established that the narrow parity clauses restricted competition in the offering of hotel rooms. The bound hotels were not permitted to offer cheaper room prices and contractual terms in their own online sales than on Booking.com. In doing so, they were particularly denied the obvious opportunity to pass on the saved mediation commission in full or in part in the form of price reductions and thereby attract customers.

The narrow parity clause could be exempted from the cartel law prohibition as an ancillary agreement to the platform contract only if it were objectively necessary for its performance. However, this was not the case. For the purpose of the contract between Booking.com and the hotel enterprises is the online mediation of hotel rooms. For this contractual purpose, however, the narrow parity clause is not an essential ancillary agreement.

Conclusion

The decision of the Federal Court of Justice (BGH) regarding the narrow parity clauses used by Booking.com in the past should be welcomed with relief by hotel operators. The Federal Court of Justice (BGH) has clarified that hotel operators can offer more cheaply on their own website.