Resale Price Maintenance and Online Sales of Hotel Rooms
On 31 January 2014, the UK Office of Fair Trading (OFT) ended its case involving online travel agents (OTAs) Booking.com and Expedia Inc, together with InterContinental Hotels Group, by accepting commitments from the companies to change their business practices in the UK.
The OFT’s investigation centred on competition concerns that Booking.com and Expedia had both entered into separate agreements with IHG which restricted their ability to discount the rates at which room-only hotel accommodation bookings are offered to customers. This was therefore a resale price maintenance case. The OFT was not looking at “best rate guarantees” or “rate parity” arrangements of the type being looked at by other EU member state competition authorities.
The commitments mean that all OTAs and hotels that deal with these three businesses will be able to offer discounts off headline room-only rates in certain cases (which have to be driven by the customers). OTAs do not take title to or hold inventory to hotel accommodation. They operate under a merchant model (margin-based) or a commission-based model. The discounts offered by OTAs will be funded through their commission or margins.
Although the case involved only these three companies (which are important in the sector in the UK) the principles can be assumed to apply generally. The principles will also apply to any similar business models in other industries, so will be of wider application.
A Cartel Facilitator Can be Fined
The EU’s second-highest court (the General Court (GC)) has confirmed that a company that does not directly participate in a cartel, but only facilitates it, is nevertheless liable to be fined as a cartelist.
The judgment, handed down on 6 February 2014, confirms the European Commission’s (EC) 2009 finding that Swiss consultancy firm AC Treuhand should be fined for its facilitation of two heat stabilizer cartels affecting the EU. According to the EC, “The principal decisions for both cartels were taken at meetings organised by AC Treuhand, which provided its Zurich premises and services to the companies involved.” The company was therefore fined EUR348,000 in total.
The GC confirmed that EU competition law can apply to any undertaking that has engaged in anti-competitive conduct, including consultancy firms that are not active on the market affected. In particular, it is clear from existing case law that a consultancy firm will be liable for cartel activity where it contributes actively and intentionally to a cartel between producers.
The judgment therefore provides a reminder and warning that facilitators of cartels (even if outside the EU) will be seen and fined as cartelists by the EC. Compliance programmes need to take this into account.
Private Enforcement in the UK; Court Finds Abuse of Dominance
In an unusual example of a UK court finding an abuse of dominance, on 28 January 2014 the English High Court found that, assuming it was dominant, the London Luton Airport operator had abused its dominant position (contrary to UK competition law) in the award and operation of a coach concession from the airport.
The issue of whether the operator is in fact dominant will be considered later. The market allegedly relevant in that regard is that for the grant of rights to use the airport land and infrastructure to operate bus services from the airport.
The abuse found was the entering into by the airport operator of a new concession agreement with a particular coach operator, National Express. In doing so the airport operator abused its dominant position because the terms of the concession (a seven-year exclusivity period to National Express, giving National Express a right of first refusal on services to new destinations in London and discriminating in favour of another coach operator, easyBus) seriously distorted competition between coach operators wanting to provide services from the bus station at the airport, without there being any objective justification for that distortion of competition.
The court stated that a dominant undertaking can abuse its position either by distorting competition on the market on which it operates itself (the upstream market) or by distorting competition on the market on which its customers compete with each other (the downstream market). The fact that the airport operator was not a coach operator itself did not prevent any distortion of the downstream coach market arising from its conduct from being an abuse.
The judgment also shows that private enforcement of competition law continues to develop in the UK. There was no regulatory involvement from the OFT in this case.
European Commission Faces Down Google
Describing this as an “important step forward”, on 5 February 2014, the EC announced that Google had made an improved offer to end the competition law investigation into its business practices in the EU.
Under its proposal, Google has agreed that whenever it promotes its own specialised search services on its web page (e.g. for products, hotels, restaurants, etc.), the services of three rivals, selected through an objective method, will also be displayed in a way that is clearly visible to users and comparable to the way in which Google displays its own services. This will apply not only for existing specialised search services, but also to changes in the presentation of those services and for future services. This would be in addition to other concessions already made by Google.
The case shows again that the EC will enforce competition law even in fast-moving technology markets. For example, solely in relation to Google, the EC is also currently investigating allegations relating to the Android operating system and, in the Motorola case, issues concerning standard essential patents. This provides dangers for technology companies but also opportunities for complainants.
Additional European competition law news coverage can be found in our news section.