New law prohibits online booking platforms from using price parity clauses – Commentary
Need for action and perspectives
The new law amending the federal law against unfair competition (UCA) stipulates that there is unfair competition when an operator of an online platform for booking accommodation services uses terms and conditions (GTC) that restrict pricing of accommodation facilities through pricing. clauses, in particular price parity clauses.
In general, a distinction is made between “wide” and “narrow” clauses. In the event of extended price parity clauses, the accommodation structures undertake not to offer more advantageous accommodation prices on any other distribution channel. In the event of restrictive clauses, this obligation is limited to not offering on their own site prices lower than those indicated on the online reservation platform. However, accommodation structures can differentiate the prices (of rooms) between the different online booking platforms.
In 2012, at the initiative of the Swiss hotel association, the Competition Commission (ComCo) opened an investigation into online reservation platforms. In 2015, ComCo found that broad price parity clauses were anti-competitive. On the other hand, it expressly left open the assessment of narrow price parity clauses because online booking platforms had just introduced such clauses and it took time to properly assess their impact.
In 2016, Pirmin Bischof, member of the Council of States, tabled the motion “Prohibition of membership contracts for online reservation platforms against the hotel industry” aimed at prohibiting price parity clauses of any kind in relations contractual between online reservation platforms and hotels.
Although the Federal Council decided to reject the motion, it was adopted in 2017 by the Council of States and the National Council, and the Federal Council was tasked with prohibiting narrow and wide price parity clauses in contracts. between online reservation platforms and hotel companies.
The Federal Council proposes to implement this modification by means of a new article in the LCU.
The new article 8a of the UCA declares that such price fixing or price parity clauses in the GTC in relations between online booking platforms and accommodation companies constitute unfair competition.
The injustice would lie in the fact that such clauses restrict the price freedom of hosts, thus creating a disproportion between the contractual rights and the obligations of the parties concerned.
According to this understanding, the abusive character resides in the illegal contractual content of such GTC, which entails the nullity according to the general rules of the Code of Obligations.
The new provision is civil in nature. It must be applied by the private market players concerned. No penal sanction is foreseen.
The bill has been criticized for having been initiated not in the interest of consumers, but rather in the interest of the hospitality industry, thus serving individual business interests.
In this context, it is particularly troubling that the bill is unlikely to achieve the expected benefits for the hospitality industry. The study carried out to determine the regulatory consequences (regulatory impact study) showed that the proposed ban on price parity clauses would only give accommodation facilities greater legal leeway. However, one can hardly expect a significant improvement in their position in the online booking platform market.
In addition, the proposed provision would be in contradiction with the law on cartels, which aims, among other things, to promote competition. Indeed, price parity clauses have a pro-competitive effect and offer consumers tangible benefits. Therefore, it is not surprising that ComCo did not object to price parity covenants in its latest ruling in this regard. The consequence of this change of law would be a contradictory duplication of the law on cartels and the UCA and legal uncertainty that would result.
For online reservation platforms, the entry into force of this regulation would oblige them to review their GTC with the hosts and to adapt them accordingly.
The consultation period expired at the end of February 2021. It remains to be seen how the Federal Council will assess the responses to the consultation and to what extent it will adapt the new law accordingly.
for more information please contact Marcel Meinhardt Where Luzius Sidler to Lenz & Staehelin by phone (+41 58 450 80 00) or by e-mail ([email protected] Where [email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.