On the 15th, the FTC announced that five domestic and overseas hotel reservation platform (OTA, Online Travel Agency) operators reviewed the terms of contracts with domestic hotels and corrected the terms of treatment of the most favored countries.
The companies on the list for the municipal administration are famous companies such as Interpark, Booking Dot Gum, Agoda, Expedia, and Hotels.com.
Until now, domestic lodging companies have been forced to sell lodging products at the same price and conditions on virtually all platforms because of the most favored country provisions they have made with them. For example, if a certain hotel sells rooms for 100,000 won through Company A, it should not be priced below 100,000 won through hotel websites or other reservation companies B and C. In addition, if the company promised to supply 10 rooms to company A for a certain period, it could not be possible to provide more than 10 rooms to company B and C. The same standard was applied to special room conditions applied to reservation cancellation conditions and promotional products.
With this corrective measure, rooms can be sold at different prices or conditions for each OTA, so consumers will be able to meet a wider variety of products.
Earlier in July 2019, the hotel industry raised the question at a breakfast meeting with Deputy Prime Minister Hong Nam-ki that the OTA’s enforcement of the lowest price guarantee policy restricts the price competition of the hospitality industry. Accordingly, in December of the same year, the FTC visited 16 hotel companies in Seoul and Jeju-do on-site and reviewed the contracts of all OTA companies that had transactions with them.
As a result of the FTC survey, five companies, including Interpark, Booking.com, Agoda, Expedia, and Hotels.com, applied the’wide range’ of the most favored country treatment provisions while contracting with domestic lodging companies. In a wider range, it is not possible to offer cheaper rooms on other OTAs or on the hotel’s own website. On the other hand, the’narrow range’ is a case where the price policy for other OTAs is not involved, and the hotel’s own website only asks not to offer cheaper rooms. In OTA, it is a contract clause aimed at preventing the so-called’free ride for a lodging company’, such as searching for a room and then making a reservation through the hotel website.
In the process of the FTC investigation, the five companies themselves deleted the provisions for treatment of the most favored countries or revised a wide range of provisions to a narrower scope. Interpark removed all forms of treatment of most favored countries from the contract, and changed the contents of the remaining four to a narrower scope.
An official from the Fair Trade Commission said, “As business operators corrected the unfair contract terms of the hotel reservation platform themselves, they laid the foundation for the recovery of market competition.”
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