www.tourismlaw.pt The growing influence of competition law in tourism Rosaria Garozzo Italian Competition Authority International Journal of Tourism, Travel and Hospitality Law PRE-PRINT
The growing influence of competition law in tourism Rosaria Garozzo1 1. Overview. 2. The European framework. 3. ICA’s Advocacy activity. 4. ICA Investigations. 5. Conclusion. The article explores the growing influence of competition law in the European tourism sector, highlighting its economic importance and the European Commission’s policies to foster sustainable and competitive tourism. It details the Italian Competition Authority’s (ICA) efforts to address anti-competitive practices, particularly in maritime concessions and the sector of online intermediation of tourist services. Critical cases include Ryanair’s restrictive practices against online travel agencies and Booking.com’s alleged abuse of its dominant market position. These interventions ensure transparency, fair competition, and efficient resource use in the tourism industry. Keywords: Competition Law, Tourism Sector, European Commission, Sustainable Tourism, Italian Competition Authority (ICA), online travel agencies (OTAs), Ryanair. Booking.com, dominant position. 1. OVERVIEW Tourism, by the wide definition of World Tourism Organization (WTO)2, involves several activities and different subjects, such as consumers or users of services, companies operating in the hospitality, transport, cultural and environmental services, as well as professionals acting as intermediaries between supply and demand, such as travel agencies. The plurality of subjects and activities that characterize the sector, as well as the strong touristic appeal of the European territory, makes the tourism industry particularly dynamic and relevant for its economy. 1 Disclaimer: Rosaria Garozzo works for the Italian Competition Authority – Legal Directorate - The views contained in this article are personal opinions and do not in any way represent the Institution. 2 The World Tourism Organization (WTO) defines tourism as "traveling to countries other than the one in which one has habitual residence, outside one's daily environment, for a period of at least one night, but not exceeding one year and whose usual purpose is different from the exercise of any remunerated activity within the visited country": Global Code of Ethics for Tourism, adopted by the WTO in Santiago de Chile on 1 November 1999.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW In Europe, the tourism industry in the narrow sense of the term (traditional providers of holidays and tourism services) is made mainly small and medium-sized enterprises (SMEs), employing around 27 million of people. Tourism is one of the main economic activities of the European Union, with a wide-ranging impact on economic growth, employment and social development. It can be a powerful tool in the fight against economic decline and unemployment. European policy aims to maintain Europe's position as a leading destination, while maximizing the sector's contribution to growth and jobs and promoting cooperation between member States of the European Union, in particular through the exchange best practices3. For this reason, the protection of competition is becoming central in this sector, and this also because of the crucial interests that are directly and indirectly involved, other than freedom of economic initiative, such as: environmental protection, culture, education, health and safety. In addressing the topic of tourism as a lever for economic development, it is necessary to start from the observation that the protection of competition in the tourism sector risks being an illusory concept if not associated with that of the sustainability of tourism development 4 which, in 3 Since 2001 the European Commission has published several communications, the latest in 2014, in which they define its political orientations for the development of the tourism sector. These are: • COM(2007)0621 ) of 19 October 2007 – Agenda for sustainable and competitive European tourism – defining how sustainable development could ensure the long-term competitiveness of tourism and announcing a three-year series of preparatory activities; • COM(2010)0352 ) of 30 June 2010 – Europe, the world's leading tourist destination – a new policy framework for tourism in Europe – analyzing the factors that make the European tourism industry competitive and the obstacles to its development sustainable; • COM(2012)0649 ) of 7 November 2012 – Implementation and development of the common visa policy to stimulate growth in the EU – which aims to bring about an increase in the number of tourists from third countries visiting the EU by establishing a common visa policy; • COM(2014)0086) of 20 February 2014 – A European strategy for more growth and jobs in coastal and maritime tourism – which aims to promote sustainable growth and competitiveness in coastal and maritime tourism. 4 Environmental protection profiles are the subject of particular attention at the level of the European Green Deal which enhances the link between environmental sustainability and economic development: see COM (2019) 640 of 11.12.2019; see S. Cavaliere, Potenzialità e criticità delle misure a favore del settore turistico, Rassegna di diritto pubblico Europeo, no. 1, 2024, p. 86.
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM addition to being both economic and environmental in nature, must also include aspects of a social, cultural and political nature. The attention that the European Commission devoted to the issues of environmental protection and climate change5 may became the key to inspire new forms of sustainable tourism, that guarantee the sustainable and responsible use of resources and the achievement of a fair distribution of income6. 2. THE EUROPEAN FRAMEWORK Article 195 of the TFEU requires the European Union to support the tourism sector through the application of certain measures; in particular, should promote tourism and the competitiveness of companies working in this field through the identification of objectives (such as the creation of a favourable environment for the development of tourism businesses and cooperation between the States). Tourism is governed by wide-ranging principles, which essentially have a national or European dimension, such as the principle of protection of competition and the freedom of economic initiative (articles 119, 101 and 102 TFUE). In February 2022, the Commission adopted its plan entitled "Transition Path for Tourism"7. The updated EU Industrial Strategy highlighted the need to strengthen the resilience of the tourism sector and accelerate the digital and green transitions based on the experience during the Covid-19 pandemic. The transition roadmap identified several measures concerning the green and digital transition of the tourism industry. Two years later, this first stock-taking exercise shows that the transition pathway co-creation process was successful in identifying key areas for action and defining relevant objectives to inspire different groups of stakeholders to take action. While this report identifies some suggestions for improvement, the overall approach has proven successful in supporting the 5 COM(2007)0621 ) of 19 October 2007 – Agenda for sustainable and competitive European tourism – defining how sustainable development could ensure the long-term competitiveness of tourism and announcing a three-year series of preparatory activities. 6 See A. Poliseno, Turismo sostenibile e condizionalità, in Rassegna di diritto pubblico Europeo, no. 1, 2024, p. 101 e ss.; also, with regard the topic of the drammatic rise of inequality and the role of competition in reducing economic inequality see: A. Boitani and A. Pezzoli, Antitrust e lotta alle disuguaglianze: obiettivo esplicito o esternalità consapevole?, Mercato, concorrenza e regole, no. 1-2, 2023, p. 15. 7. European Commission, Transition pathway for tourism, 2022, https://data.europa.eu/doi/10.2873/344425.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW collective work towards achieving the transition of the EU tourism ecosystem and building its resilience8. In response to this plan, the European Council adopted the "EU Agenda for Tourism 2030" in December 20229. The agenda focuses on five priorities: the green and digital transitions; resilience and inclusion; skills and support; and the governance and policy implementation framework. In the plan, the Council underlines its determination to promote sustainable tourism, taking into consideration all the key dimensions of economic, environmental, cultural and social sustainability, in response to, among other factors, climate change and loss of biodiversity, in accordance with the United Nations 2030 Agenda for Sustainable Development and its commitment to support tourism that creates sustainable jobs and promotes local culture, products and services. Tourism significantly contributes to economic development across Europe and can help to achieve the objectives of various EU, national, regional and local policies thanks to its economic and social dimensions and the high ratio of micro, small and medium-sized enterprises operating directly or indirectly along the tourism value chain. The tourism ecosystem is composed of several economic sectors, which have their own specific sectoral approaches, where over 99 % are micro, small and medium-sized enterprises. It is well kown that various EU policy domains, such as transport, employment or consumer protection, often impact the tourism ecosystem due to its cross-sectoral nature; this, it is important to have a coimplementation process, as part of the Transition Pathway for Tourism. This is a good starting point to strengthen cooperation among tourism stakeholders, the Commission and the Member States in order to identify possible topics, actions, key actors, conditions and objectives for the green and digital transition of tourism towards a more resilient ecosystem. Thus, the Council invites the Member States to: a) exchange knowledge and best practices for developing and implementing tourism strategies at various governance levels, taking account of the economic, environmental, cultural and social sustainability of tourism and including the perspectives of visitors as well as local residents, organise awareness-raising activities on such themes as the benefits of the green and 8European Commission, Transition pathway for tourism: taking stock of progress by 2023, 2024, https://data.europa.eu/doi/10.2873/775069. 9 See: European Council conclusions on European Agenda for Tourism 2030, Brussels, 1 December 2022
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM digital transformation, demand for sustainable offers, new skills and experimenting in tourism, to provide for the protection of local culture, including tangible and intangible cultural heritage; b) help to build resilience in the tourism ecosystem across sectors and different public and private actors; c) contribute to the green transition of the tourism ecosystem regarding: i) transport, e.g. by supporting the decarbonisation of mobility, through innovations, new and breakthrough technologies, the development of multimodal travel and by increasing the attractiveness of sustainable modes of transport for passengers, with particular attention to the needs of the peripheries, less accessible areas, islands and outermost regions; and by promoting active mobility modes, such as cycling and hiking, and encouraging longer stays; ii) more circular and sustainable operations by tourism establishments across the ecosystem, including attractions, hospitality services, travel agents and tour operators; iii) creating conditions and incentives to improve the circularity of tourism services in line with EUwide and national targets for food waste and waste separation, including reduced use of single-use plastic; iv) supporting sustainable tourism with regard to water management, energy efficiency, sanitation capacity and the protection of biodiversity10. 3. ICA’S ADVOCACY ACTIVITY The interventions of Italian Competition Authority (hereinafter, ICA) on the matter are consistent with similar principles valued at the European level in the tourism sector. ICA has acted to eliminate the violations of competition law set up in the touristic field, mainly through a wide advocacy activity. The advocacy function focuses on the regulations set up by the Italian legislator (at national or local level) that can reduce competition between undertakings, damage the dynamics between operators and produce negative effects on consumers. Namely, among the most significant interventions, it should be remembered that ICA has adopted numerous opinions on the topic of limitations on competition deriving from Italian legislation on maritime concessions for tourist-recreational purposes. 10 See: European Council conclusions on European Agenda for Tourism 2030, Brussels, 1 December 2022
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW ICA's interventions aimed censure both unjustified extensions of existing concessions11 and provisions contained in the selective procedures initiated for the assignment of new concessions likely to jeopardize a correct competitive comparison. Furthermore, since 2018, ICA has highlighted the opportunity of quickly adopting legislation relating to beach concessions which provide for the immediate selection of concessionaires based on principles of competition, impartiality, transparency which guarantee an efficient use of public resources and adequate remuneration of the asset, as to allow the transfer of a greater part of the income to the community12. With reference to extensions, ICA has repeatedly underlined how the continued use of this instrument violates the principles of competition to the extent that it prevents competitive comparison in the market, which should be guaranteed when awarding services involving State resources13. During the two-year period 2020-2021, in particular, ICA invited multiple municipal administrations to disapply the national legislation underlying the decisions to extend maritime concessions for tourist-recreational purposes due to their conflict with articles 49 and 56 of the TFEU and Article 12 of Directive 2006/123/EC14. Lastly, the EU Court of Justice has stated: (i) the immediately enforceable nature of Article 12 of the Services Directive, as both the obligation for Member States to apply an impartial and transparent selection procedure among potential candidates is stated in an unconditional and sufficiently precise manner (points 66-67) and the prohibition on automatically renewing an authorization issued for a specific activity (points 68-69); (ii) the obligation not only for the judge but also for the State administrations, including 11 See, Emanuele Boscolo, Beni Pubblici e concorrenza: le concessioni demaniali marittime, Urbanistica e Appalti, 2016, no.11, p. 1211. 12 See AS1550 – Concessioni e criticità concorrenziali, in Official Bullettin n. 48/2018. 13 See AS1730 – Proposte di riforma concorrenziale ai fini della legge annuale per il mercato e la concorrenza anno 2021, in Official Bullettin n. 13/2021. 14 See, for example, AS1701 – Comune di Piombino (LI) – Concessioni demaniali marittime con finalità turistico ricreative, in Official Bullettin n. 41/2020; AS1729 – Comune di Ginosa (TA) – Proroga delle concessioni demaniali marittime con finalità turistico ricreative, in Official Bullettin n. 13/2021; AS1725 – Comune di Reggio Calabria – Proroga concessioni demaniali marittime con finalità turistico-ricreative, in Official Bullettin n. 12/2021; AS1799 – Regione Autonoma della Sardegna – Proroga delle concessioni demaniali marittime con finalità turistico-ricreative, in Official Bullettin n. 43/2021.
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM municipal ones, to disapply national legislation conflicting with that of the Union15. In this sense, the position taken in certain rulings of the Italian administrative judge, according to which the application of art. 12 must be considered conditional on the preliminary investigation entrusted to the Member States to ascertain the scarcity of the natural resource16. This interpretation effectively translates into an arbitrary subtraction - for an indefinite time - of the obligations imposed by European Union law. In fact, as also recalled by the Council of State, where the resource is scarce or, even if it is not scarce, the single concession has a cross-border interest, the opening of the market is required and, therefore, every need related to the assignment of the current player that holds a concession can at most be evaluated when establishing the rules of the pubblic tender17. With specific regard to the issue of state concessions and their duration, this path has already been reiterated by the Constitutional Court, which noted the occurrence of unequal treatment between economic operators as a result of the automatic ex lege extensions of maritime concessions and the consequent violation of competition principles18. 4. ICA INVESTIGATIONS 4.1. In the last few years important ICA intervention has focused on the online platforms for tourist services19. This new channel is significantly modifying the characteristics of international tourism and the way tourism businesses operate internationally. Naturally, this revolution has also influenced the competitive dynamics of the market20. Tourist services can be sold individually or as part of a so-called tourist package, in which case the specific legislation comes into play. 15 See, Court of Justice, 20 April 2023, AGCM, Municipality of Ginosa, C-348/2022, ECLI:EU:C:2023:301. 16 See, judgment Tar Lazio, 2 novembre 2023, n. 1223. 17 See Judgment Consiglio di Stato, 20.5.2024. n. 4480 18 See, Judgment Corte Costituzionale, 24 giugno 2024, n. 109 19 See Claudio Rangone, Effetti delle misure antitrust sulle “clausole di parità” applicate ai contratti nel settore delle prenotazioni alberghiere, Rivista Trimestrale Appalti, 2027, no.2, p. 463; G. Cipolla; Il settore delle prenotazioni online: gli impegni di Booking e la clausula di parità. Un caso condotto in cooperazione con le altre Autorità Nazionali di Concorrenza., Rivista Italiana di Antitrust 2015, vol. 2, no. 3, pp. 175-180, on the monitoring exercise carried out in online hotel booking sector by EU Competition Authorities in 2016. 20 See Pal Szlagyi, On line agency and competition law, European Competition Law Review, 2018, p. 436.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW The European Commission, in its precedents, considered that it could not exclude that the distribution of tourist packages constitutes a separate market from the sale of individual services that the buyer combines independently21. Also in this case, the advent of the Internet has largely changed the dynamics of the sector: services whose distribution was previously the almost exclusive prerogative of traditional travel agencies are now also offered by Online Travel Agencies (OTAs) and other entities, primarily air carriers, which, starting from the transaction for the purchase of the airline ticket, can cross-sell and sell the traveler all the other tourist services he needs, making use of specialized partners. 4.2. On 14 September 2023, ICA launched an investigation regarding an alleged exclusionary abuse of dominant position by Ryanair DAC22, the largest air carrier in Italy offering scheduled air transport services of passengers on national flights and flights to and from Italy. In a second step, ICA extended the investigation to the company Ryanair Holdings Plc, which appears to exercise a decisive influence on the company Ryanair DAC23. The investigation has been initiated following several reports received by the Authority since last May, where several associations complain that Ryanair was damaging the activity of OTAs and the interest of consumers. In ICA’s preliminary view, the alleged violation of Art. 102 TFUE concerns the markets for scheduled air passenger transport services and those, connected to the first, for booking and sales services of tourist services. Furthermore, in this case, in consideration of the large number of routes potentially affected by the conduct in question and the weight that these routes have for travel agencies, both physical and online - which, to operate profitably, must be able to offer a range of travel solutions capable of responding to the needs of the average consumer to the greatest possible extent, offering the widest choice of travel solutions both domestically and abroad – according to ICA, it is also necessary to consider the number and the range of individual routes, i.e. of the individual relevant origindestination markets (hereinafter, O&D), which constitute all national and European connections to/from Italy. 21 M.5996 Thomas Cook / Travel Business of Co-operative Group / Travel Business of Midlands Co-operative Society; M.6163 – AXA /Permira / Opodo / Go Voyages / eDreams. 22 See AGCM Decision, 14.9.2023, n. 30772 (A568), in Official Bulletin n. 36/23. 23 See AGCM Decision, 16.1.2024, n. 31027 (A568), in Official Bulletin n. 5/2024
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM The market for the sale of tourist services has been identified in the booking and sale services of tourist services (flight, hotel, car rental, etc.) which, due to their different characteristics, can each constitute a different relevant market, which could be abstractly subject to further segmentation (e.g., off-line or on-line). Nevertheless, in this case, ICA assumes that the advent of the internet has largely changed the dynamics of the sector: services whose distribution was previously the almost exclusive prerogative of traditional travel agencies are now also offered by OTAs and other entities, primarily air carrier, which, starting from the transaction for the purchase of the airline ticket, can crosssell and sell the traveler all the other tourist services he needs, making use of specialized partners. This being so, in addition to the booking and sale of airline tickets, the booking and sale of hotel services and the booking and sale of car rental services are relevant; infact this tourist services have a close connection with air transport and, moreover, Ryanair intermediate their sale on its website. According to ICA, considering the growing presence of OTAs and airlines alongside the traditional agency channel, which has led to a homogenization of the competitive conditions of these markets, at least on the national territory, and also taking into account the linguistic uniformity of the different versions of the websites of these subjects in each country, the market can be considered, as a first approximation, national ICA stressed that Ryanair DAC it seems to leverage on its dominant position in several markets of air transport sector in order to extend its market power also into the offer of other tourist services (such as hotels and car rental), harming travel agencies - both online and offline – as well as clients that buy those other services from such agencies. In particular, on the one hand Ryanair appears to impede travel agencies from directly acquiring airline tickets through their own websites; on the other, Ryanair permits traditional travel agencies to purchase airline tickets exclusively on the GDS platform, subjecting them to considerably less favorable conditions in terms of pricing, range of available services, and post-sale management of airline tickets. Ryanair's conduct seeks to restrict travel agencies from selling airline tickets, which is typically the initial step in planning a holiday and a crucial entry point for selling additional services. As such, it could have adverse consequences on both travel agencies and end-consumers, leading to a deterioration of conditions, both in terms of quantity and quality of the services, and unjustified difficulties in managing reservations.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW According to ICA, such conduct could constitute a possible abuse by Ryanair of its dominant position in the air transport markets, aimed at marginalizing, if not excluding, travel agencies from the markets for booking and selling tourist services, centralizing the sales of airline tickets and other tourist services on its own channels. In fact, it is necessary to consider that on many routes involving the Italian territory the Ryanair offer represents the only available alternative (or, in any case, the one that offers the greatest number of flights and at the best fares) and that not having Ryanair in its inventory could undermine the ability of agencies to offer the end customer a complete range of travel solutions. Following the initiation of the procedure, with decision of 3 April 2024, n. 31151, ICA also started a precautionary proceeding pursuant to article 14bis of law no. 287/1990, aimed at verifying the actual existence of the necessary requirements for the adoption of precautionary measures aimed at restoring and maintaining competitive conditions in the market24. It seems that the conduct described above had worsened starting from November 2023, both with reference to the obstacle to the purchase of Ryanair flights by agencies, and with reference to the denigration campaign. In particular, it emerged that Ryanair appeared to have introduced further IT measures aimed at completely and preventively impeding the purchase of Ryanair tickets by agencies via the Ryanair.com website. Subsequently, this blocking became intermittent and unpredictable, limited to some days of the week compared to a total and systematic blockade on other days. Given this block, it seems that OTAs are no longer able to sell Ryanair flights. Furthermore, it seems that starting from January 2024, Ryanair has entered into some agreements with OTAs - in particular Kiwi - aimed at regulating the sale of Ryanair tickets; these agreements appear to mean that the OTAs refer to the Ryanair website for booking and continue to restrict the offer of Ryanair flights. This being so, ICA hypothesized that Ryanair's conduct therefore appears to determine a serious and irreparable danger for competition in the tourism sector, which makes the adoption of precautionary measures particularly urgent given the (total or semi-total) blocking of bookings. The only alternative offered relating to the aforementioned distribution contract could constitute a significant change to the business model capable of jeopardizing, pending the proceedings, the ordinary competitive dynamics with reference to the purchases of Ryanair flights, alone or in conjunction with other tourist services. 24 See AGCM Decision, 3.4.2024 n. 31151 (A568), in Official Bulletin n. 15/2024
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM This could lead to the disappearance, fromm the Italian market, of the commercially autonomous offers of OTAs relating to Ryanair flights, which represented approximately 50% of domestic passengers in Italy in 2023. This risk is all the more serious if we consider the relevance of the period in question for the tourism sector, in view of the start of the summer season. By virtue of the purchasing dynamics of online tourist services (consumer choice based on past experience, inertia in purchasing choices, reputational effects on OTAs), Ryanair's conduct could lead to a consolidation of the effects of the conduct which is difficult to reverse over time, as well as a risk also for the generality of tourist services offered by OTAs. On this basis, ICA alleged that Ryanair's conduct might cause serious and irreversible damage to OTAs and, consequently, to consumers, as they are denied, at the height of the flight booking season for the summer holidays, the possibility of having broad, effective, continuous and transparent access to Ryanair flights. At the end of the precautionary proceeding, ICA assumed that there was no requirement of periculum in mora and that, therefore, it was not necessary to adopt precautionary measures. In particular, without prejudice to any assessment of the validity of the charges and the possible restrictive effects of the partnership agreements with online agencies, ICA stated that the willingness expressed by Ryanair to conclude such partnership agreements which, in the near future, should allow online agencies to sell Ryanair tickets with solutions integrated into its website (so-called embedded, i.e. which allow booking without leaving the online agency website, with the exception of a pop-up with a summary page on the Ryanair website). Also, this would allow the sales of non-aviation ancillary services and the application of additional commissions or discounts (provided they are explained in a transparent manner to users). This being so, pending the conclusion of the procedure, ICA assumed that there does not appear to be a risk of serious damage and irreparable for the competition25. 4.3. Finally, on 24 March 2024, ICA opened an other investigation concerning Booking.com (Italy) S.r.l., Booking.com B.V. e Booking.com International B.V. to ascertain an alleged abuse of dominant position in the 25 ICA Decision, 21 may 2024, See Official Bulletin, n.23/2024 (A568): the investigation is expected to conclude by April 3, 2024.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW market of online intermediation and booking services, in breach of Art. 102 TFEU26. The Booking group is a leader in intermediation and online booking services for accommodation facilities and through the website www.booking.com, available in more than 43 languages, through which you can access over 28 million structures worldwide. According to public sources, the Booking group, which is part of the Delaware-based Booking Holdings Inc., operates locally through companies that provide support and assistance to customers in each country; in Italy it operates through Booking.com (Italy) S.r.l. The investigation was started on the basis of some reports made by two associations of Italian hoteliers, AICA and Federalberghi, who complained about a complex Booking strategy, aimed at limiting the autonomy of accommodation facilities in determining the commercial conditions for the customer, through, among other things, the application of discounts - visible on the platform - unilaterally applied by Booking on the price of the room, and the request for increasingly higher commission to improve one's positioning in the search results on the platform. As part of the hearings with the main competing OTAs, Lastminute and Expedia/Hotel.com, held in December 2023, elements were acquired regarding the context in which competition between these operators develops: Lastminute has a strategic partnership in place for the sale of packages on Booking; Expedia has developed a different business model from Booking. Furthermore, it was underlined that the price to the final consumer represents the main variable on which competition between OTAs develops and, finally, that the consumer tends to resort directly to the portal of the large OTAs which, in addition to having a significantly broader inventory, propose loyalty systems that give the consumer the perception of incurring lower costs. The case concerns the market of online intermediation and booking services for overnight stays offered by OTAs to hotel and para-hotel accommodation facilities (so-called OTA hotels). OTA hotels represent an intermediation and booking channel of absolute importance, both Europe wide and in Italy. In fact, according to data provided by the Hotrec survey, over 68% of bookings made online in Europe (and 76% in Italy) took place via OTA, compared to 27% (23% in Italy) directly on the hotel website. Tourist service intermediation platforms constitute a typical example of a two-sided market, which connects two different groups of users (in this 26 ICA Decision, 24 march 2024, See Official Bulletin, n. 12/2024 (A558).
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM case, hotels and end customers), in such a way that the demand from one group affects demand from the other. These markets are characterized by important network effects, as the value attributed by users to the platform depends on the number of subjects from the same group (direct network effects) and/or from the other group (indirect network effects) who use it. According to ICA, the market has at least a European dimension as OTAs reach structures and consumers at an international level. However, it cannot be excluded that the geographical scope of the relevant product market can be identified in relation to online hotel booking services offered to hotel and para-hotel accommodation facilities located in Italy, as in Italy there is a prohibition on introducing rate parity clauses, both broad (in relation to other OTAs) and narrow (in relation to the suppliers of the accommodation service, i.e. hotels)27. Based on the information available, ICA has assumed that Booking is in a dominant position in the market (both European and national) of online hotel intermediation and booking services offered by OTAs, taking into consideration, among other things, that in many European countries, Booking intermediates on average around 68% of hotel bookings made through OTAs. In ICA’s preliminary view, the abusive strategy implemented by Booking would consist, on the one hand, in ex ante binding the most profitable accommodation facilities, through adhesion to the so called “Preferred Program” (and the linked “Preferred Plus Program”, hereinafter, Program), on the basis of which the participating structures are bound to offer prices on the Booking platform that are no higher than those offered on other OTAs, with the promise of greater visibility and in exchange for the payment of higher commissions; on the other hand, in intervening ex post, unilaterally applying on the price charged by the structure on the Booking site, without the consent of its hotel partners, the so called “Sponsored Discount”, where Booking finds that the structure applies lower prices on other online channels (hereinafter, “external prices”), in order to align prices on its platform to the best online offer available. In particular, the Sponsored Discount is a discount that Booking applies to the price of booking the rooms offered on its platform. The discount is financed entirely by Booking, which waives part of the commission received from the partner structure to reduce the price of the room visible to the 27 See Pal Szlagyi, On line agency and competition law, European Competition Law Review, 2018, no. 10, p. 437; Enzo Marasà, Italy introduces a legislative ban on price-parity clause in the booling sector, European Competition Law Review, 2018, no.4, p. 196.
INTERNATIONAL JOURNAL OF TOURISM, TRAVEL AND HOSPITALITY LAW consumer on the booking.com platform. However, when the price is already "competitive" compared to "external" prices, Booking can still apply a discount to ensure that the price it offers is the best available online, but in this case the structure must have first agreed to the possibility that Booking apply the BSB at their own discretion. In order for Booking to intervene directly on the price through the Discount, the structure must join the "Pay with Booking" program. Overall, this strategy is likely to hinder the unfolding of effective competition in the (at least) national market for the online hotel intermediation and booking services, to the detriment of other OTAs, with adverse effects on hotels and ultimately consumers, in terms of higher prices and less choice for intermediation and booking services. In fact, Booking, through the simultaneous application of the aforementioned Program and the Sponsored Discount policy described above, is able to limit the autonomy of structures defining their pricing strategy, reproducing effects possibly similar to those deriving from the application of discount clauses. In fact, these programs are apt to discourage competing OTAs from reducing the commissions requested from the structures: these cannot reward them by charging lower prices due to the request for lower commissions, because otherwise they would risk losing the advantages in terms of visibility on the Booking platform deriving from participation in the Preferred Programs; at the same time, even if they applied lower prices on other OTA sites, Booking would seem to restore parity by intervening with the discount. It follows that any reduction in the commission would only have the effect of squeezing the margins of competing OTAs, not compensated by a subtraction of Booking's sales volumes. Therefore, the combination of the two tools described might reduce the incentives of OTAs to compete on the level of commissions requested while, at the same time, that might limite the expansion opportunities of competing OTAs suitable for producing a generalized increase in retail prices on all online sales channels in the medium-long term. At the moment the investigation is still ongoing and should be concluded in May 2025. 4. CONCLUSION The investigations carried out by ICA demonstrate the relevance of the application of competition rules in the tourism sector which, like other economic sectors, is affected by the influence of new technologies and the
THE GROWING INFLUENCE OF COMPETITION LAW IN TOURISM power exercised by the so-called gatekeepers, such as Booking28, for which it is necessary to identify new intervention tools that guarantee the development of sustainable tourism, from an environmental and social point of view. 28 On 13 May 2014 the European Commission designated under the Digital Markets Act (DMA), Booking as a gatekeeper for its online intermediation service Booking.com. Today's decisions follow a review process conducted by the Commission after receiving the notifications of the three companies regarding their potential status as gatekeepers on 1 March 2024. On the basis of Booking's self-assessment submitted on 1 March 2024 that it meets the relevant thresholds, the Commission has established that this core platform service constitutes an important gateway between businesses and consumers.
Contact Estoril Higher Institute for Tourism and Hotel Studies carlos.torres@eshte.pt www.tourismlaw.pt IJTTHL Celebrating five years of the first publication Vincenzo Franceschelli, On Tourism Law | Quest for general principles, https://fles.tourismlaw.pt/On-Tourism-Law-Quest-for-generalprinciples/ Alejandro Corral Sastre, A new Administrative Law for a new Tourism: now or never, https://fles.tourismlaw.pt/A-new-AdministrativeLaw-for-a-new-Tourism-by-Alejandro-Corral-Sastre-/ Jonas Thyberg, The Package Travel Act and the Covid19 pandemic, https://fles.tourismlaw.pt/The-Package-Travel-Act-and-the-Covid19pandemic-by-Jonas-Thyberg/ Caterina del Federico, The use of artifcial intelligence in the travel and hospitality industry. Civil liability profles, https://fles.tourismlaw.pt/The-use-of-artifcial-intelligence-in-the-travel-and-hospitalityindustry.--Civil-liability-profles "We are celebrating the 500 anniversary of the discovery of the Magellan strait with two online publications. On October 21, the launch of Derecho del Turismo en Las Américas brought together colleagues from all Latin American countries. On the same day, the Collective Commentary about the New Package Travel Directive, with colleagues from the then 28 Member States. More recently, Competition Law in Tourism and Tourism Law in Europe are publications demonstrating this group's dynamism. The pandemic has not broken the bonds that have united and unite us. Here we are again here in Lisbon, more numerous and more motivated than ever, to consecrate what will be the voice of our group: The new international journal of Tourism Law, The International Journal of Tourism, Travel and Hospitality Law.” • Vincenzo Franceschelli, The Lisbon Group and International Tourism Law Five years after the frst international publication (The New Package Travel Directive, October 2017) at the ESHTE | INATEL International Conference in October 2022, bringing together 50 speakers from 27 countries, a new project was announced: The International Journal of Tourism, Travel and Hospitality Law (IJTTHL). IJTTHL brings together several universities and is published both in print and online. The central part will be in English but will have an IberoAmerican chapter, and the texts are immediately available through Pre-Print. Monika Jurkova, Liability of online platforms in the tourism sector, https:// fles.tourismlaw.pt/Liability-of-online-platforms-in-tourism-sector-Monika-Jurkova/ Francesco Torchia, Tourism enterprise and cultural heritage protection, as a legal instrument for valorization of the territory and of the person, https:// fles.tourismlaw.pt/Tourism-Enterprise-and-Cultural-Heritage-protection,-as-a-legal-for-valorization-of-the-Territory-and-ofthe-Person-by-Francesco-Torchia/ Valérie Augros, Holiday lettings in France: tips and tricks, https://fles.tourismlaw.pt/ Holidays-lettings-in-France---Tips-and-tricks-by-V.-Augros/ Sarah Prager, Competition law: online travel agents and airlines, https:// fles.tourismlaw.pt/Sarah-Prager,--Competition-Law---OTAs-and-airlines/ Andrej Micovic, Legal Tech and Online Dispute Resolution, https://fles.tourismlaw.pt/ Microsoft-Word---A.-Micovic---Legal-Tech-and-ODR-in-Tourism./ Pilar Juana Garcia Saura, The inspection of tourist accommodation by Public Administrations: problems with the use of the robot inspector (web spider) and the responsibility of collaborative platforms, https://fles.tourismlaw.pt/Collaborativeplatforms-in-accommodation-by-Pilar-Saura/ Michael Wukoschitz, A Wicked Deed’s Curse – Will X v Kuoni change the Organiser’s Liability?, https://fles.tourismlaw.pt/Will-X-v-Kuoni-change-the-organisers-liability,---M.-Wukoschitz/ Bertold Bär-Bouyssiere, Sustainability and Article 101(1) TFEU, Exploring (almost) virgin territory, https://fles.tourismlaw.pt/Sustainability-considerations-and-Article-101-TFEU/ Tatjana Josipovic, Modernisation of information requirements for consumers on online tourism services market, https://fles.tourismlaw.pt/Modernisation-of--informationrequirements-for-consumers-on-online-tourism-services-market-by-Tatjana-Josipovic/ Matija Damjan, The new online platform rules and the accommodation booking services, https://fles.tourismlaw.pt/The-new-online-platform-rules-and-the-accommodation-bookingservices-by-Matija-Damjan/ Ilie Dumitru, EU legislation and contractual relationship between the travel package organizer and the air carrier in case of charter fights. Liability for cancelled and delayed charter fights, https://fles.tourismlaw.pt/EU-legislation-and-contractualrelationship-between-the-travel-package-organizer-and-the-air-carrier-in-case-of-charter-fights.-Liability-for-cancelled-anddelayed-charter-fights-by-Ilie-Dumitru-IJTTHL-PRE-PRINT/ João Almeida Vidal, Arbitration and tourism: a feld to explore, https:// fles.tourismlaw.pt/Arbitration-and-tourism--a-feld-to-explore-by-Joao-Vidal/ https://fles.tourismlaw.pt/International-Journal-ofTourism,-Travel-and-Hospitality-Law2023/
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