Booking.com has just been fined a record €413 million in Spain for « abuse of dominant position ». Is this justified?
This case falls under the regulatory framework of the Digital Market Act (DMA), a recently established body designed to monitor the dominant positions of tech giants, particularly the GAFAM. This new legislation came into effect in March 2024.
On the agenda:
1. The charges against Booking.com
2. So who’s to blame?
3. What should be done?
The charges against Booking.com
« Imposing various unfair commercial conditions on hotels in Spain using its booking intermediation services and restricting competition from other online travel agencies offering similar services ».
There’s always a bit of discomfort when an abuse of dominant position involves a successful intermediary. After all, as an OTA (Online Travel Agency), Booking.com is merely an intermediary and hoteliers have benefited from it quite significantly. It’s undoubtedly challenging for a small player to gain recognition, but Booking.com is precisely one of those intermediaries that have invested heavily to give visibility to those who lacked it.
The regulator estimates that the Dutch OTA controls 70% to 90% of the Spanish hotel market, which is obviously problematic. However, it remains the responsibility of hoteliers to diversify their distribution, segment their demand, develop other segments like corporate clients, enhance their direct sales, or build customer loyalty.
So who's to blame?
The public authority is within its rights when it remains vigilant on several issues that could harm customers, such as the inability to sort offers by specific criteria or unverifiable information like « only 2 rooms left at this price » etc. It is also justified when it protects hoteliers from contract clauses deemed unclear, for instance, the « lack of transparency on the impact and profitability of subscribing to the Preferred, Preferred Plus and Genius programs ».
However, Booking.com is criticized for imposing price parity. Yet, this provision was the rule for everyone just a few years ago, and it was a common-sense rule: it required hoteliers not to unfairly compete with their distribution partners by benefiting from the visibility offered by an OTA while loudly proclaiming that prices were cheaper directly on their website. In other words, Booking.com does the work to promote the product, and the hotelier converts sales with a lower price. The purpose of price parity is understandable, and under these conditions, it’s not shocking that Booking.com defends this position..
Cette disposition était pourtant la règle pour tout le monde il y a encore quelques années.
Et c’était une règle de bon sens : elle imposait à l’hôtelier de ne pas faire de concurrence déloyale à ses partenaires de Distribution en profitant, d’un côté, de la visibilité offerte par un OTA tout en martelant bien fort, de l’autre, que les prix étaient moins chers en direct sur son site web.
En d’autres termes, c’est à Booking.com de faire le boulot pour faire connaître le produit et c’est l’hôtelier qui convertit les ventes par un prix plus bas.
On comprend donc à quoi sert la parité tarifaire.
Et ce n’est pas choquant dans ces conditions que Booking.com défende cette position.
The principle of an OTA is simple: it brings you business and, in return, takes a commission. Therefore, in a distribution mix, it’s necessary to rely on this type of actor in territories that don’t directly compete with your own clients, for example, in foreign markets, while investing in marketing tools for your own market.
What should be done?
The regulator could, for example, ensure a fair distribution of value, similar to what it’s trying to do, albeit weakly, in the retail sector. But it’s always tricky to get into the cycle that could partially bring tourism into an overly regulated and potentially subsidized economy. Capping commission rates at 20% to prevent an OTA from forcing weaker operators to pay unreasonable commissions could be a solution.
Regarding the second issue raised by the regulator «… restricting the competition of other online travel agencies offering similar services » the matter is more delicate. Gaining and expanding market share by being better than others is hardly condemnable, except in specific cases, like those encountered in the airline industry.
We recall the bankruptcy of XL Airways, whose downfall was caused by the massive deficit of Norwegian Air, which sold its long-haul flights at the price of a Paris-Marseille TGV ticket. The Oslo-based airline, outside the European Union and supported by the Danish crown through the public DNB Bank, had to raise 6 billion kroner in fresh capital to avoid its own bankruptcy.
This type of situation, which can lead to killing a competitor at the cost of insane debt, must be regulated. Microsoft’s case also sparked significant controversy due to its near-monopoly situation, particularly with its integration of closed systems that hindered the emergence of more open standards, the default integration of browsers (Internet Explorer) or the bundling of Windows with manufacturers’ PCs.
If Booking.com is guilty of such actions, it must be held accountable to stop stifling competition and repair what can be fixed. However, the regulator’s arguments haven’t been disclosed, making it difficult to judge this aspect of the case. In this scenario, it would be the competing OTAs rather than the hoteliers who were harmed.
As for the rest, it seems that Booking.com is being blamed for its success – success that capitalized on the lack of investment by hoteliers. It’s now up to them to regain control, and for the sake of our profession, to do so through the market rather than by law.
Keywords : Booking.com, fine, abuse of dominant position, Spain, DMA, GAFAM, OTA, price parity,…