MFN Clauses in a European Competition Perspective: A Competition Law and Industrial Organization Study of the Legality of MFN Clauses Used on the Online Hotel Booking Market in Denmark and the EU

Josephine Charlotte Weyen Nord

Student thesis: Master thesis

Abstract

The European competition authorities have lately had an increased focus on the use of MFN clauses in online hotel booking market. However there have been considerable disagreements among the national European competition authorities on whether MFN clauses are contrary to the competition rules of the art. 101 TFEU.
The legal analysis has shown, that found that MFN clauses in the Danish online hotel booking market meet the requirements of art. 101 paragraphs. 1 TFEU
In Denmark Booking.com, Expedia and Hotels.com have the majority of the online booking platform market, and their market shares were valued at over 30% of the relevant market. Therefore the MFN clauses could thus not be exempted via BER for vertical agreements. A full competition was then needed to clarify the MFN-clause’s effect on the market and weigh positive and negative effects up against each other. This analysis showed that the major booking platforms possess a large amount of market power and that the majority of online hotel booking sales are affected by the MFN-clause presence. It can be concluded that barriers to entry in the online hotel booking market is high and that MFN clauses helps maintain and strengthen the booking portals market position. Furthermore, it was found that MFN clauses causing higher retail prices, since the booking portals market power enables them to squeeze commission rates up, causing the hotels to raise the price to achieve sufficient profit to the detriment of the consumers.
The free-riding threat argument cannot be justified in relation to the booking platforms the good earnings potential in the market. On this basis the MFN clauses are in contrary to art. 101 paragraph. 1 TFEU, and should therefore be declared invalid cf. Art. 101 paragraph 2 TFEU.
It is recommended to draw up some guidelines specifically for MFN clauses to ensure a more effective and consistent enforcement of competition rules.
The Commission has an increased focus on the digitization of the internal market and has decided to support business and stakeholders' own efforts for self- and co- regulation. More self regulation could strengthen the major booking platforms market position even further, but In return, Airbnb has had an explosive growth in the Danish online booking market, and grabbed market share from booking portals. This can squeeze booking portals to reduce their costs and thereby cause greater competition in the hotel booking market to benefit consumers.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages100
SupervisorsSøren Sandfeld Jakobsen