The Hungarian Competition Authority (GVH) has concluded its expedited sector investigation into the domestic online accommodation booking and lodging market. In its draft report, the Hungarian watchdog has made several recommendations, including prohibiting contractual practices that hinder price competition, banning price parity obligations, and improving the situation of hosts in effectively managing market issues similar to those that occur during the summer season. Market participants have 30 days to provide their feedback on the proposal.
The proposals will be discussed by Parliament’s Economic Affairs Committee on Tuesday 24 October at a meeting in Parliament starting at 10am. The presenter will be Mr Balázs Csaba RIGÓ the president of the Hungarian watchdog.
The GVH initiated this expedited sector investigation at the end of August in response to numerous complaints from domestic accommodation providers, most notably from partners of the major international accommodation intermediary, Booking.com. The GVH’s investigation thoroughly addressed the problems reported by accommodation providers, including issues related to sudden price changes. It also analyzed the post-COVID-19 competition dynamics in the affected markets and scrutinized the contractual terms and practices of lodging intermediaries that could affect competition between accommodation providers.
The tourism sector is one of the driving forces of the Hungarian economy, contributing over a tenth of the national GDP and providing employment for approximately 400,000 people. To maintain and boost competition in this economically significant sector and enhance the competitiveness of domestic players, the GVH has put forth several legislative proposals in its draft report.
No more mandatory price parity!
The GVH proposes to prohibit mandatory price parity requirements in the contractual terms of online accommodation portals, allowing accommodation providers to set their room prices freely on their own websites. This recommendation is in line with international examples, as it aims to forbid the application of so-called price parity provisions. These provisions essentially require accommodation providers, in exchange for listing their rooms on an online accommodation platform, to commit to not selling their rooms at a lower price anywhere else, including on other accommodation portals and even on their own websites. However, according to the GVH’s analysis, these provisions impede competition among different distribution channels and commission competition among lodging intermediaries, ultimately resulting in higher accommodation prices for consumers. Therefore, the competition authority proposes a full legal ban on these agreements, following the lead of several European countries, such as France, Austria, Italy, and Belgium.
In addition, the national competition authority suggests that accommodation intermediaries make the criteria for ranking search results on their platforms transparent. Service providers often prioritize accommodation providers who offer higher commissions, but this information is not always presented to consumers in a clear and understandable manner. As a result, accommodation providers with lower commission rates, which could offer lower prices to consumers, may end up at a disadvantage (at the end of search result lists). Clear, unambiguous information about ranking could lead to more informed consumer decisions and stimulate competition among accommodation providers.
General terms and conditions cannot be unlimited
The GVH also made a recommendation regarding the regulation of terms and conditions, and business practices related to dispute resolution mechanisms and mutual consequences for faulty performance in cases of a large number of domestic lodgings affected by payment issues during the summer. According to the investigation, the negotiations and contractual relationships between parties are often unequal, and agreements typically include detailed rules for compensating accommodation providers for breaches of contract but lack provisions for possible shortcomings on the platform’s side. Therefore, the competition authority suggests considering the regulation of the general terms and conditions and related business practices of major lodging intermediaries concerning the dispute resolution mechanism available to accommodation providers and the mutual consequences of faulty performance.
The draft report based on the results of the expedited sector investigation has been made available for public consultation on the GVH’s website. Market participants have 30 days to provide feedback on the content of the draft report and its proposals. After the deadline, the national competition authority will prepare a report on the results of the expedited sector investigation, summarize the received comments, and, if requested, publish the comments in full on its website.
You can find the draft report of the expedited sector investigation on the GVH’s website.
