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Competition Authority publishes draft study on online accommodation booking services

2016/01/14

Early December 2015 the Hungarian Competition Authority (“GazdaságiVersenyhivatal”; abbrev. HCA) published its draft study regarding the market of online accommodation booking services.

Pursuant to the Hungarian antitrust act[1], the HCA may launch a so-called business branch investigation in the event price changes or other market movements suggest, that on any of the markets in the given business branch the competition deteriorates or lessens. Based on this, the president of the HCA ordered a respective investigation with respect to the market of online booking services in April 2013. This has become necessary after the HCA has realized along with the ever growing importance and publicity of online booking services the possibility of market restrictions, deteriorations has increased alike. Nearly half of all accommodation bookings in Hungary were done online during the period of the procedure.

In the course of the investigation the HCA has approached several market players for data supply, ordered a market survey from a professional advisory company and has also used data of the Central Statistics Office and other kind of researches. The authority has established that through the appearance of online booking services the market has become more transparent than ever and it has also supported a price competition among accommodation providers. However, no competition was detected among the online services and also the prices of the individual accommodations were basically the same at all online providers, at least during the period under investigation.

Based on the findings of the HCA the lack of price competition was to a great extent a result of the so-called rate parity applied by the online booking providers in which the accommodations would abstain from offering their services at a lower price at other online booking providers. Accommodations may only adhere thereto by setting a uniform price on all online sales channels, which then leads to the termination of price competition between online booking providers offering the very same accommodation. Since this practice is not only applied by international, but also by domestic online booking providers, the HCA’s investigation draw the conclusion that even a single rate parity agreement with a major online booking provider may lead to uniform accommodation prices on the entire market, on all available sales channels.

The investigation has also shown that on the one hand the rate parity has a rather negative effect from the point of view of accommodations, since they could reach higher profits by using their own sales channels or platforms applying lower commissions, whereas on the other hand as a result of online booking providers the occupancy ratios have increased.

The HCA has also reviewed the European practice in this regard and found that it rather tends to accept the so-called restricted parity conditions, i.e. requiring accommodations not to offer their services on online booking platforms at lower rates than they do on their own websites.

In its general assessment the HCA establishes, that full scale rate parity agreements may restrict competition by standardizing prices and raising the constraints on market entry. These are not associated with efficiency advantages and positive effects on consumer welfare to such extent that would provide reason for the complete restriction of competition within a brand.

As a final conclusion the HCA points out that since it has experienced that Hungarian-owned market players and international market players in their operations on the Hungarian market have not followed the restricted parity practice of international companies, it is not excluded that it will intervene in order to change the distorting market practices in the event market players shall not alter their actions in this regard.

Source: www.gvh.hu

[1]Section 43/D of the Act No. LVII of 1996

 


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