Will 'Lowest Price Competition' Activate Through Hotel Booking Platforms Like Hotels.com and Interpark?

Fair Trade Commission Corrects 'Most-Favored-Nation' Clauses of OTA Operators

Due to Most-Favored-Nation Clause, All OTAs Have Sold at Same Price and Conditions Until Now
From Now On, Hotels Can Sell Accommodation Products at Different Prices and Conditions on Each OTA

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[Sejong=Asia Economy Reporter Joo Sang-don] From now on, hotel operators will be able to sell accommodation products at different prices or conditions on hotel reservation platforms (OTAs) such as Hotels.com, Agoda, and Interpark. Until now, due to the 'Most-Favored-Nation Clause (MFN)' which requires 'not to offer better conditions to other OTAs or the hotel’s own website than those provided on their own platform,' hotels had no choice but to sell accommodation products at the same price and conditions across all OTAs. This change comes from the revision and deletion of the clause regulating this.

The Fair Trade Commission announced on the 15th that it reviewed the contract clauses between five domestic and international OTA operators?Interpark, Booking.com, Agoda, Expedia, and Hotels.com?and domestic hotels, and corrected the MFN clauses accordingly.

This corrective action was taken following complaints from the domestic hotel industry. In July 2019, the domestic hotel industry raised concerns that the MFN clauses of OTAs restricted price competition in the accommodation sector. In response, the Fair Trade Commission conducted on-site visits in December of the same year to 16 hotels located in Seoul and Jeju Island and inspected contracts with all OTA operators trading with them.

As a result, it was confirmed that OTA operators such as Interpark, Booking.com, Agoda, Expedia, and Hotels.com were using broad MFN clauses in contracts with domestic accommodation providers. Clauses that require not to offer better conditions to other OTAs or the hotel’s own website than those provided on their own platform are considered broad MFN clauses, while clauses that do not require better conditions than other OTAs but at least prohibit offering better conditions on the hotel’s own website are considered narrow MFN clauses.

For example, if a specific hotel sells a room for 100,000 KRW through OTA A, it cannot sell the same room for less than 100,000 KRW through the hotel’s website or OTA B, C, etc. Also, if a specific hotel promises to supply 10 rooms to OTA A for a certain period, it cannot provide more than 10 rooms to OTA B, C, etc. The operators involved deleted the MFN clauses themselves or revised broad MFN clauses to narrow MFN clauses during the Fair Trade Commission’s investigation.

A Fair Trade Commission official said, "As COVID-19 subsides and the travel industry resumes, visible effects from this measure are expected to appear," and added, "The Fair Trade Commission plans to continuously monitor related issues not only in OTAs but also in other platform sectors."

This content was produced with the assistance of AI translation services.