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Narrow or Wide? Court aligns Germany with other jurisdictions on MFN-Clauses in Bookings.com case

  • United Kingdom
  • Germany
  • Competition, EU and Trade

07-06-2019

On 4 June 2019 the Higher Regional Court of Düsseldorf ruled in favour of Booking.com’s revised “narrow” Most Favourite Nation (“MFN”) clause (Case No. VI-Kart 2/16 (V)).

The reactions were predictable. German hotel representatives are furious and fear that small hotels will soon be subject to the “small and big villainy of dominant portal-giants”. The German Federal Cartel Office (“FCO”) was “disappointed” that it had not been able to convince the court of its opinion despite the “60% market share of Booking.com”. Booking.com has been more reserved and has not yet commented on whether it will seek damages in this case which the court has valued at EUR 5 million.[1]

From a more neutral point of view, the Higher Regional Court’s judgment will – should it be upheld on appeal - align Germany with other European jurisdictions.[2]

For years and in many jurisdictions hotels and booking platforms have been arguing their case in front of the competition authorities. The hotels pleaded that any MFN-clause – especially if used by a dominant platform – limits their liberty to freely set prices which in turn restricts competition. Conversely, in the booking platform’s view, MFN-clauses are necessary to secure their return on investment in providing marketing and visibility to hotels, justifying their 10-15% commission. If hotels were allowed to undercut a platform’s best rate the hotels would effectively be free riding on the platform’s expense. Empirically, according to a market investigation conducted by the FCO, 72% of hotels do in fact undercut the platforms price or offer a better value.[3]

The French, Italian and Swedish watchdogs all initiated investigations against Booking.com, but stopped their investigations after Booking.com committed to use only “narrow MFN-Clauses”. MFN-clauses are considered “narrow” when hotels may offer better rates offline (and/or on other platforms) but not on their own website. In these jurisdictions, the authorities tried to reconciliate the differing views by finding some kind of middle ground. This was not the position taken by the FCO. It ruled against any type of MFN-clauses. While Booking.com provisionally complied with the ruling by changing its terms and conditions in Germany, it also challenged the FCO’s view in court.

Now the Higher Regional Court of Düsseldorf, chaired by Jürgen Kühnen, has sided with Booking.com. It ruled that “narrow” MFN-clauses are “necessary to ensure a fair and balanced exchange of services between the parties”.

The impact of the judgment may affect other platforms. Whoever runs a flight, carsharing or bed-and-breakfast platform will eagerly wait for the written reasoning to be published. However, the wait may be extended until the Federal Court of Justice has ruled. While the right to appeal has not been granted by the Higher Regional Court, the FCO can challenge this in front of the Federal Court of Justice and likely will.


[1] Ironically, another booking platform, HRS, has recently (on 30 April 2019) settled its dispute with hotels by paying EUR 4 million.

[2] Notwithstanding the French Government’s plans to legislate on the issue.

[3] Further, according to a GFK study commissioned by Booking.com 40 to 60% of guests would book on a hotels website rather than on a platform it the hotel offered a 5 % rebate.