Booking, Decolar, and Expedia reach Cease and Desist Agreement with CADE
Cease and Desist Agreement
The online travel agencies Booking.com, Decolar.com and Expedia have signed Cease and Desist Agreements (TCCs in its acronym in Portuguese) with the Brazilian Administrative Council for Economic Defense (CADE) in order to suspend an inquiry regarding the practice of abusive price-parity clauses in contracts signed with hotel chains that use their internet sales platforms.
The agreements were negotiated by CADE’s General Superintendence and were approved by the Council during the Judgement Session that took place this Tuesday, March 27.
The price-parity clauses applied by the three main online travel agencies – which have broader nature – aim to guarantee that they are able to offer more advantageous prices, room availability and conditions to customers, in comparison to those offered by the hotel chains in their own sales channels (online and offline) or in competing companies’ platforms.
According to the studies and evidence gathered, the parity clause causes two main effects: it sets limits to the competition among agencies, homogenizing the final price offered to the customer; and it turns the entrance of new players in the market more difficult, since strategies in that sense, such as low commission pricing, do not reflect in the final price as a result of parity.
As stated by the terms of the agreement signed, Booking.com. Decolar.com and Expedia must cease the use of the broad parity clause in their commercial relations with accommodation suppliers. Therefore, it is not permitted to apply it to forbid better offers made by these hotels, in their offline sales channels (check-in counters, physical travel agencies, and call-centers). Besides, they won’t be able to demand parity in relation to the prices charged by other online travel agencies.
On the other hand, while negotiating the agreements, the General Superintendence understood that the maintenance of the possibility to require a parity regarding the offer of accommodation through the website of the hotels is reasonable. It is an action to mitigate the so-called free rider effect in the online hotel reservation market – that is when sellers and buyers connect through the agencies platforms but seal the deal by other means. In the long term, this practice could harm the online agencies business and cause an even bigger loss to the customers.
Thus, it is expected that, through the agreements, it will be possible to increase the competition among online travel agencies in the country, with positive effects to the final customer and to the hotel sector.
The Cease and Desist Agreement is valid for three years and due to the typicity of the conduct, there is no legal obligation to pay a pecuniary contribution.
The administrative inquiry was started by the General Superintendence in 2016, from a representation filed by the Brazil Forum of Hotel Operators (Fórum de Operadores Hoteleiros do Brasil - FOHB).
The debate about the theme is not recent, but it is still under analysis by competition agencies in other countries. Cade’s decision regarding the possibility of using price-parity clauses with a reduced scope follows the understanding of other antitrust authorities. It is the case of the antitrust authorities from Italy, Sweden, and France that accepted, in 2015, a commitment proposed by Booking.com to use only restrict price-parity clauses in its contracts.