Switzerland’s Federal Price Watchdog has ordered Booking.com to reduce the commission rates it charges Swiss hotels by nearly 25%, describing the current rates as “abusively high.” This decision follows an investigation into Booking.com’s pricing practices and aims to alleviate the financial burden on Swiss hoteliers. The reduction becomes legally binding three months after the ruling becomes final and remains in effect for a period of three years.

1) Background and Legal Context

The Swiss Price Supervisor has initiated proceedings against Booking.com after attempts to reach a mutually agreeable solution regarding commission rates were unsuccessful. Under Swiss law 1, the Price Supervisor 2 has the authority to intervene and set prices if they are deemed to be abusive, particularly when a company holds a dominant market position. Booking.com, as a leading online travel agency in Switzerland, is subject to this scrutiny.

A multi-stage procedure is applied, based on an analysis of market positioning, competition, and pricing. In the case of Booking.com, the analysis confirmed that it is subject to the PüG and that its commission rates for Swiss hotels are too high. The Price Supervisor contacted Booking.com to eliminate this abusive practice through mutual agreement. Despite intensive negotiations, it was not possible to reach a mutually agreeable settlement.

2) Booking.com’s Response and Appeal

Booking.com has expressed disagreement with the ruling, arguing that its services are optional and that the commission rates reflect the value it provides to hotels. The company plans to appeal the decision 3. The mandated reductions in commission rates will take effect three months after the ruling becomes legally binding and will remain in place for three years.

3) Broader European Regulatory Trends

This action is part of a larger regulatory trend in Europe. For instance, earlier in the same week, the Spanish government directed Airbnb to remove over 65,000 listings that allegedly violated local laws. These regulatory moves aim to manage the impact of online tourism platforms, which are often blamed for contributing to housing shortages in urban areas.

4) Implications for Swiss Hoteliers and Travellers

The reduction in commission rates is expected to ease financial pressure on Swiss hotels, enabling them to offer more competitive pricing directly to consumers. As a result, travellers may enjoy lower prices and increased transparency since hotels will have more flexibility in setting their rates without the limitations of previous parity clauses.

This development signifies a significant shift in the regulatory landscape governing online travel agencies in Switzerland and may influence similar actions in other countries.

 

Carlos Torres

 

1 The Price Supervision Act  (Preisüberwachungsgesetz, PüG, SR 942.20) stipulates that all prices of cartels and companies with market power, whether public or private, are subject to price monitoring. It establishes the legal framework for monitoring and supervising prices in markets where competition is limited or absent, aiming to protect consumers and the economy from abusive pricing practices.

The law applies to the prices of goods and services, including loans, but excludes wages and other duties arising from the employment relationship. Competition agreements within private and public companies with market power are included.

 

2 The PüG designates the Price Supervisor (Preisüberwacher) as the authority responsible for monitoring price developments and preventing or remedying excessive prices that are not the result of effective competition. The Price Supervisor’s role includes overseeing prices, preventing unjustified price increases, and recommending price reductions when necessary.

Additionally, the PüG mandates collaboration between the Price Supervisor and the Competition Commission (ComCo). The Price Supervisor participates in ComCo meetings in an advisory role, and both organisations share essential decisions and consult each other on issues related to market power and competition.

3 Booking.com may appeal the decision to the Federal Administrative Court within 30 days of receipt of the notification of the Price Supervisor’s ruling.