Brazil's competition enforcer has reached settlement agreements with three online travel agencies to ban the use of "wide" price parity clauses.
Booking.com, Decolar.com and Expedia must stop using such clauses when doing business with accommodation providers, Brazil's Administrative Council for Economic Defence said yesterday.
The "wide" price parity clauses had blocked accommodation providers from offering better prices on third-party reservation sites that compete with Booking.com, Decolar.com and Expedia. The enforcer said the settlement still allows the use of "narrow" price parity clauses, which bar hotels from offering lower prices directly through their own websites or offline.
CADE considered the problem of freeriding in its decision, saying such practices could derail the business of online agencies, ultimately causing even greater harm to consumers. Freerider concerns relate to customers finding hotels through popular websites that compare the prices of many accommodations, but then making the purchase directly through the hotel if that is cheaper than the price for that hotel offered by the online travel agency.
Marcelo Nunes de Oliveira, who led the case team at CADE, said it is a "very important" decision that allows competition in a growing market, with better conditions to both consumers and hotels. He also said it is a good precedent on how CADE deals with conduct concerning multi-sided platforms.
The agency said it received a complaint from the Forum of Hotel Operators in Brazil and started its investigation in 2016. It hopes the agreements will increase competition between online travel agencies in Brazil, CADE said.
Marcel Medon Santos, a partner at Tozzini Freire who represented Decolar.com in the case, said the agreement was good for the company, as it could have taken years to settle thedispute through the courts.
CADE was "sensible" in accepting the company's arguments, and to consider the issue of freeriding in its decision, he said. Decolar.com "told us at the beginning of the case that [freeriding] was major concern for them."
Eduardo Caminati, a partner at Lino Beraldi Belluzzo e Caminati and counsel to the complainant Forum of Hotel Operators, said CADE's decision follows, in general, the best practices around the world. By ceasing the imposition of parity clauses with a broad scope, an increase in competition among online travel agencies can be expected, and lead to positive effects for final consumers and the hotels themselves, he said.
Pinheiro Neto partner Leonardo Rocha E Silva said the settlements are an important development for the online booking market in Brazil, noting that CADE understood it was not necessary to impose a financial penalty on the companies. It shows the agency's ability to conduct "sophisticated discussions with independence and maturity", he said.
Vicente Bagnoli, managing partner of Vicente Bagnoli Advogados in São Paulo, said the decision aligns with those of other jurisdictions and confirms that in most cases regarding the digital economy, CADE tends to observe what has been done by other competition authorities.
Guilherme Ribas, a partner at Mundie e Advogados in São Paulo, said the online reservation platforms were "clever" about settling, and this could be a global strategy as they face probes around the world.
Several other jurisdictions have investigated price parity or most-favoured nation clauses in online travel agencies' contracts with accommodation providers featured on their websites.
France and Sweden simultaneously accepted Booking.com commitments, in 2015, that allowed narrow parity clauses; multiple other enforcers have also accepted similar commitments including Australia, in Denmark, Greece and Ireland.
But last year, Italy's parliament moved to ban both wide and narrow hotel rate parity clauses, overruling its national competition authority. Germany's Federal Cartel Office has banned most-favoured nation clauses outright, with the Düsseldorf's Higher Regional Court, in 2015, backing up the enforcers decision.
In a statement, Booking.com said it is "pleased" with CADE's decision, which lines up with "what 27 other competition authorities throughout the world have also decided, which is that platforms like Booking.com bring a transparent and consistent price comparison experience for consumers."
Decolar.com confirmed the agreement reached with CADE and said it remains focused on developing and delivering best value to its customers.
Expedia said it worked "closely and constructively" with CADE and the changes will be notified to all existing Expedia accommodation partners in Brazil in the coming weeks. The company said it helps its accomodation partners become "visible and bookable to consumers globally", and contributes to the development of tourism in Brazil.
Counsel to Decolar.com
Tozzini Freire Advogados
Partner Marcel Medon Santos in São Paulo
BMA - Barbosa Müssnich Aragão
Partners Barbara Rosenberg and Marcos Exposto in São Paulo
Counsel to Booking.com
Magalhães e Dias – Advocacia
Partner Gabriel Dias in São Paulo
Counsel to Forum of Hotel Operators
Lino Beraldi Belluzzo e Caminati Advogados
Partner Eduardo Caminati Anders in São Paulo