Parity Clauses: Evaluation Study on VBER for European Commission
Tuesday, 02 June 2020
uncategorised
online-distribution
working-document
The European Commission's DG COMP has published a study evaluating the impact of the Vertical Block Exemption Regulation (VBER). At present, the VBER renders it possible for OTAs (Booking, Expedia etc.) to impose narrow parity clauses on hoteliers. The study brings positive news for hoteliers, as it states in its executive summary:
as regards this evaluation study, qualitative insights gained from the stakeholder interviews and the results of the econometric analysis suggest that narrow MFNs have generated the same anti-competitive effects as wide MFNs in the hotel sector. However, the same report emphasises that the effects of MFN clauses depend on the particular characteristics of the market in which they are used, and therefore a case-by-case analysis is necessary. The evidence collected in the study does not support general conclusions about the effects of narrow as compared with wide MFNs in sectors other than the hotel sector. Indeed, outside this sector, the study has not found any widespread evidence that narrow or wide MFN clauses produce anti-competitive effects.A key element of the conclusion of the econometric analysis also sheds light on the benefits of legislation banning narrow parity clauses:
The ban on narrow MFN clauses seems to have strengthened competition in the relevant markets and to have led to a reduction in the best price that consumers can find for a typical booking. However, one should exercise caution when interpreting the results, as the placebo test using a fake treatment timing failed. Nonetheless, there is a consistent indication that the ban on narrow MFN clauses decreases hotel prices, as the results are consistent in a range sub-samples and different specifications.The aim of study, which was outsourced to a consortium of consultants, is to gather evidence on the functioning of the VBER, together with the Vertical Guidelines, which will serve as a basis for the Commission to decide whether it should let the VBER lapse, prolong its duration or revise it before the Regulation expires on 31 December 2022. It is likely that a process to revise the Regulation will begin in late 2020. The study is based on a combination of comparative legal analysis, literature review, online surveys, econometric analysis and case studies. HOTREC and several Members were consulted during this study. It assesses in depth the effects of MFN clauses in several sectors and correctly identifies the detrimental effect that narrow MFN clauses (also known as narrow parity clauses) specifically have on hotel distribution. The full text of the study is available here below.