Introduction

On 13 May 2020, the Competition Commission (the “Commission”) published a notice announcing its acceptance of voluntary commitments offered by three online travel agents (“OTAs”) under section 60 of the Competition Ordinance (Cap. 619) (the “Ordinance”) and hence its termination of investigation of their suspected anti-competitive conduct. This marks an important enforcement milestone for the Commission as this is the first time for the Commission to accept voluntary commitments under section 60 of the Ordinance.

Background

The Commission conducted an investigation of suspected anti-competitive conduct in relation to three online travel agent websites, namely Booking.com (“Booking”), Expedia.com (“Expedia”) and Trip.com (“Trip”) (collectively, the “Parties”). 

Under the investigation, the Commission examined whether the Parties’ agreements with Hong Kong accommodation providers (e.g. hotels) contain provisions that require accommodation providers to always give the Parties the same or better terms as those they offer or apply in all other sales channels in respect of (a) room prices (the “Wide Price Parity Provisions”), (b) room conditions and / or (c) room availability (collectively, the “Relevant Provisions”). 

The Commission found that Booking’s and Expedia’s agreements with accommodation providers contain all the Relevant Provisions, whilst those of Trip contain Wide Price Parity Provisions. The Commission was of the view that such provisions have the potential effects of harming competition among OTAs, impeding entry and expansion by new or smaller OTAs, and depriving consumers of the benefits of effective competition. The provisions may therefore harm competition in contravention of section 6 of the Ordinance, which seek to prohibit anti-competitive agreements, concerted practices and decisions.

Legal framework for voluntary commitment

Section 60(1) of the Ordinance provides that the Commission may accept a commitment to take any action or refrain from taking any action to address its concerns about a possible contravention of a competition rule under the Ordinance. If the Commission accepts a commitment, it may agree to terminate its investigation and not to bring proceedings in the Competition Tribunal (or terminate them if proceedings have already been brought).

However, the Commission may later withdraw its acceptance of commitments under the circumstances provided for in section 61 of the Ordinance, including where there has been a material change of circumstances or where the commitments have not been complied with.

Parties offering commitments are not required to make any admission of a contravention of the Ordinance.

The Commission is required to consult on proposed commitments before accepting them and consider any representations received on the proposed commitments. Upon acceptance of the commitments, the Commission shall publish the commitments in its Register of Commitments.

Commitments offered by the Parties

The Parties offered various commitments (the “Commitments”) under section 60 of the Ordinance, which, inter alia,:

1.        seek to ensure the existence of room prices, room conditions and room availability as potential competition parameters between the Parties and with respect to other OTAs and offline sales channels of accommodation providers; and

2.        require the Parties to remove Wide Price Parity Provisions from their respective agreements with Hong Kong accommodation providers. This will allow (a) competitions among OTAs by inducing accommodation providers to offer lower prices on their platforms in return for the OTA agreeing to a lower commission rate on room sales, and (b) accommodation providers to offer lower room prices to OTAs that agree to charge lower commission rates.

The Parties propose to implement the Commitments within 90 days from the date of receipt of notice of the Commission’s acceptance.

Consultation and Decision

The Commission commenced a consultation on the Commitments. Having considered the representations received in the consultation process, the Commission found it necessary to request the Parties to make the following amendments to the Commitments:

clarification in each of the Commitments as to the online travel agent brands that are subject to the Commitments within each online travel agent group; and

a requirement for each of the Parties to submit an annual compliance statement to the Commission with respect to its obligations in the Commitments.

In the end, the Commission accepted the Commitments as amended and decided not to continue its investigation or bring proceedings in the Competition Tribunal against the Parties. In substance, the Commitments would result in the complete removal of the Relevant Provisions from the agreements between the Parties and accommodation providers within 90 days of acceptance.  This will resolve the competition concerns of the Commission effectively and in a timely manner.  The Commission also considers that the Commitments provide a proportionate enforcement response when taking into account of the context of the Parties’ conducts and the harm caused or likely to take place.

Key takeaways

The Commission’s acceptance of voluntary commitments for the first time in Hong Kong is a milestone for the Commission.  This demonstrates its willingness to use the full range of enforcement approaches under the Ordinance to achieve proportionate and appropriate resolutions to its competition concerns. In light of this development and with a view to saving time and costs, a party facing investigations/proceedings from the Commission may consider offering voluntary commitments under section 60 of the Ordinance in order to put a halt to the investigations/proceedings at an early stage.