The Competition Commission has found that Booking.com’s price parity clauses impede competition, and its lack of diversification distorts competition from black communities.
The commission’s Online Intermediation Platforms Market Inquiry Report, released Monday, identified Booking.com as the leading online platform in travel in South Africa.
It is the largest online travel agent (OTA) for traditional hotel and accommodation establishments, with Airbnb only being large in alternative accommodation.
The commission said Booking.com imposes two price parity clauses on hotels and other establishments – wide price parity, and narrow price parity.
Wide price parity conditions are placed on hotels and other establishments and require them to offer room prices to Booking.com that are no less favourable than those provided to other OTAs.
The commission said wide price parity is now generally accepted as “a hardcore restraint of trade”, and Booking.com has removed these clauses in the EU but persists in applying them locally.
“In essence, the clause prevents other platforms from competing with Booking.com on price, which not only harms consumers but impedes other OTAs from charging a lower booking commission to hotels in exchange for lower prices, hurting competition on platform commissions and prices too,” it said.
Narrow price parity prevents hotels from pricing lower on their own websites or online bookings.
This clause makes it difficult for hotels to develop their direct channels and reduces their bargaining power with Booking.com.
According to the commission, there is no reason for consumers to book directly under narrow parity as there is no advantage and potentially a disadvantage where there are loyalty discounts and a generous cancellation policy on Booking.com.
“This dependency on Booking.com enables it to extract higher commission fees directly or through loyalty programmes and other schemes that provide greater visibility and customer acquisition or punish hotels that deviate with a low ranking,” the commission said.
The commission has, therefore, ordered Booking.com to remove its price parity clauses and inform all hotels and accommodation providers in South Africa that list on its platform.
In addition to its problematic price parity clauses, the Competition Commission has found that Booking.com lacks diversification in its listings, which disadvantages black-owned establishments and distorts competition from black communities.
The commission explained that Booking.com has an increasing influence on bookings by both foreign and domestic travellers, as ranking high on the search results drives bookings.
“Whilst black communities struggle to compete in the tourism sector due to a historical lack of tourism infrastructure development, the OTAs have predominately focused on established tourism and travel destinations and establishments, reinforcing historical advantage and disadvantage,” it said.
“This is reflected in the small number of listings from black-owned establishments and communities and the lack of promotion of alternative tourism communities.”
The commission found that this market feature impedes the ability of black-owned establishments and communities to compete and sustain themselves in the tourism industry.
To address this distortion, Booking.com must now implement substantial programmes to provide funding for initiatives in the “identification, onboarding, promotion and growth of SMEs that are black-owned and/or in black communities on the Booking.com platform”.