Switzerland opens consultation on prohibiting online booking platforms from including price parity clauses in contracts with hotels

On 11 November 2020, the Swiss Federal Council opened a consultation procedure for an amendment (article 8a) to the Federal Act against Unfair Competition (UCA), which would prohibit price-fixing clauses, including price-parity clauses, in the general terms and conditions of online-booking platforms for accommodation services. According to the Swiss Federal Council, the objective of this new provision is to ensure that hotel pricing is not dependent on online-booking platforms. As a consequence, hotels will be in a better position to promote direct sales, particularly via their own websites.

The current preponderance of online-booking platforms has been linked to the extremely rapid digitalisation of the hotel industry and the steady increase in online bookings over traditional distribution channels. In order to remain competitive, hotels must be able to promote direct sales on their own websites. Online-booking platforms, however, have tried to prevent hotels from offering their services at lower prices on their own websites by imposing price-parity clauses in their contracts with hotels.

Also known as most-favoured-nation (MFN) clauses, price-parity clauses prohibit hotels from offering a third party better conditions than the online-booking platform. Such clauses can be "narrow" if they only preclude the hotel from offering lower prices on its own website or they can be "wide" if they prevent the hotel from offering better conditions on their own or any other distribution channel (e.g. e-mail, telephone or competing online booking platforms).

In 2015, the Swiss Competition Commission (COMCO) ruled in a case against online hotel booking platforms Booking.com, HRS and Expedia that wide price-parity clauses were unlawful under the Swiss Cartel Act. However, the COMCO left open the question whether narrow price-parity clauses violate antitrust law. Narrow clauses had just been introduced by the platforms and the authority wanted to wait and see before assessing their effect.

In the EU, price-parity clauses have also been the focus of both national competition authorities (NCAs) and new legislation. While most NCAs have not intervened over narrow price-parity clauses, some EU member states have passed legislation prohibiting both wide and narrow clauses. In France, the "Loi Macron", which entered into force on 1 October 2016, classifies the clause in both variations as unlawful. The legal situation is similar in Austria, where in 2016 wide and narrow price-parity clauses were deemed inadmissible aggressive business practices under the Austrian Unfair Competition Act. Similar laws have been passed in Belgium and Italy. In other jurisdictions, such as the UK, Sweden and Germany, the assessment of parity clauses has been left to competition authorities and the courts. In Germany, the Higher Regional Court of Düsseldorf recently reversed the German NCA's decision and concluded that narrow price-parity clauses are in principle lawful thereby aligning the German position with the one taken by other European NCAs. However, the German NCA has filed an appeal against the court's decision and the case is currently pending with the German Federal Supreme Court.

In its final report of 10 May 2017 on an inquiry into the e-commerce sector, the European Commission takes an even more lenient approach and provides for a safe harbour for both wide and narrow price parity clauses by stating that such clauses are unproblematic if the market shares of both parties do not exceed 30%. If the market share of either party exceeds 30%, an individual assessment is required.

As in some EU countries, the Swiss legislator seems to be taking a stricter approach than its competition authority by introducing the suggested provision in the UCA. The Swiss Federal Council's current draft clearly aims at prohibiting both wide and narrow price-parity clauses in the general terms and conditions of online hotel booking platforms. However, the suggested provision is only in the consultation-procedure stage and likely to stir controversy in Switzerland.

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