Booking.com agrees to comply with Competition Commission’s remedial actions

Booking.com has agreed to implement the remedial actions outlined by the Competition Commission after it was found guilty of violating regulations.

The remedial actions listed in the final report of the Online Intermediation Platforms Market Inquiry (OIPMI) include the removal of wide and narrow price parity terms.

Siyabulela Makunga, the Commission’s spokesperson says they are pleased with the settlement of the online accommodation platform, as this will benefit consumers.

Wide and Narrow price parity

Makunga explains that the online accommodation platform will remove both wide and narrow price parity terms from all contracts with accommodation providers in South Africa.

Wide price parity is a clause included in contracts by Booking.com with accommodation providers to offer prices that are no higher than any other online travel intermediation platforms.

Narrow price parity is another clause that has been in contracts between Booking.com and accommodation providers.

“A narrow price parity clause requires accommodation providers listing on Booking.com to publish or offer prices that are no higher than their own direct online booking channel i.e. own website,” says Makunga.

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“Removing both these clauses effectively enhances price competition between online travel agents and allows accommodation providers such as hotels and guesthouses to price lower on their own websites for online bookings,” adds Makunga.

He believes the changes will benefit consumers by offering lower price options online and will allow accommodation providers to innovate and develop their direct sales channels.

The findings of the report

The Commission initiated the OIPMI to investigate if the features in Business-to-Consumer (B2C) online platform markets prevented fair competition between platforms and between businesses using these platforms. 

B2C is an online platform that businesses use to sell products and services directly to consumers. These are platforms such as online travel agencies, food delivery, app stores, and property/automotive classifieds.

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“The Commission has reason to believe that there are market features of online intermediation platforms that may impede, distort or restrict competition; and in order to achieve the purposes of the Act including the participation of small and medium enterprises (SMEs) and historically disadvantaged persons (HDPs) in these markets,” reads the report.

The Commission also investigated the role of Google Search in shaping the B2C platform.

Remedial Actions

Makunga adds that they hope the act by Booking.com to agree to the remedial actions will encourage the other four firms who have been found guilty of violating the Commission’s regulations.

The remedial actions by the Commission are outlined with the purpose of benefiting businesses and consumers. “The remedial actions are expected to provide greater visibility and opportunity for smaller platforms; enable more intense platform competition; level the playing field for small businesses selling through these platforms; and provide a more inclusive digital economy.”

He says Booking.com will in addition put in place a programme to provide funding for initiatives to identify, onboard, promote, and grow accommodation establishments, activities and experiences provided by small to medium enterprises that are owned by HDPs or HDP communities.

Other four firms

The report says the investigation revealed that Google Search dominance and business model distort platform competition as small and new platforms struggle for visibility and customer acquisition. The remedial actions given to the platform focused on improving paid and organic result visibility for smaller SA platforms.

Takealot has also been listed as one of the firms that violated regulations.

“In essence, they allow businesses to trade within the Takealot platform by listing products on their customer website and using their warehouse and logistics services to fulfil orders for a fee. Smaller businesses wishing to trade on online marketplaces in SA are highly dependent on Takealot,” explains the report.

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Takealot was also found of imposing on sellers ‘narrow price parity,’ preventing them from pricing lower on their own websites. This also prevented sellers from reducing their dependency on Takealot by developing this alternative online channel.

“The Inquiry similarly finds that Takealot’s narrow price parity clause distorts competition and requires Takealot to remove this clause and inform all marketplace sellers on its platform.”

Apple App Store and Google Play Store are labelled to collectively account for most mobile users in the SA. Businesses and app developers who wish to be part of the growing software economy must be done through these app stores.  

“The Inquiry finds that Google Play and Apple App Store are unconstrained in the commission fees they charge paid app developers. The remedial actions require Google Play and Apple App stores to stop preventing apps from directing consumers to pay on the app’s own website, and to ensure continued free use by consumers of content purchased from that website.”