From 1 June, a new EU regulation will come into force that, among others, restricts online accommodation providers from entering into agreements that require hotels to advertise their rooms at the best price with them. The regulation does not only concern the tourism sector, since it deals with restrictive agreements between suppliers and buyers, in general.
As revealed in the summary provided by Kapolyi Law Firm, a new EU regulation on restrictive agreements between suppliers and buyers will enter into force on 1 June. According to Dr. Zoltán Bánki, attorney-at-law in association with the Law Firm, the new rules confirm that not only companies above the market share threshold of 30 % need to act with due care when entering into agreements restricting competition, but also smaller ones. Under the new rules, irrespective of the market shares, a restriction of sales of services or products of the buyer through its own website is allowed only in exceptional cases. As the summer approaches, the focus of interest will be on large online accommodation portals and their partners (among them on hotels, in particular), Kapolyi Law Firm points out that the Regulation applies not only to the online but also to the offline world. The amendment was necessary mainly because online commerce has undergone significant changes in the recent years and new responses have had to be found to the problems that have arisen. The change is particularly important and forward-looking for the large accommodation intermediary sites as the summer and the peak season in tourism approach and could lead to a significant change in the already established practices between hotels and intermediary sites.
Online sales: own online stores and websites can be restricted only in exceptional cases
Under the new rules, if the buyer is active merely at the retail level, restrictions on the operation of its own website and online store is allowed only in exceptional cases, irrespective of the degree of the parties’ market share. Exceptions may be made if it can be proved that the restriction is proportionate and allow consumers a fair share of the benefits resulting from the enhanced efficiency. The new rules also clarify in which cases agreements may prohibit the buyer’s advertisement from appearing on price comparison sites or search engines. As a general rule, the use of an advertising channel can be restricted if the parties’ market share is below 30% and the agreement does not entirely prohibit the buyer from advertising on a particular online advertising channel (for example, on price comparison sites).
Exceptional exemption from the prohibition
Agreements undesired under the new rules may only be exempted from the prohibition of restrictive agreements if these allow consumers a fair share of the benefits resulting from enhanced efficiency and, the restriction remains proportional, as noted by Dr. Zoltán Bánki, an expert at Kapolyi Law Firm. However, the companies concluding such agreements always need to be able to prove that these conditions are met simultaneously, otherwise the competition authority may find an infringement. This risk requires a high degree of caution also in the case of restrictive agreements between supplier and buyer.
Background: three distribution systems, franchise systems
The new rules take into account the characteristics of each distribution system and, accordingly, distinguish between three systems, namely, between selective distribution system (where the supplier sells only to distributors selected on the basis of specified criteria, and these distributors do not sell to distributors not selected by the supplier within the territory of the selective distribution system ), exclusive distribution system (where the supplier allocates a territory or a group of customers exclusively to itself or to a maximum of five buyers and restricts all its other buyers from targeting this territory or this customer group), and free distribution system (which is neither a selective distribution system nor an exclusive distribution system).
The new rules cover the competition aspects of franchising as well. Accordingly, restrictive clauses in franchise agreements must be assessed on the basis of the rules of the distribution system that most closely corresponds to the franchise agreement in question.