The article was written for Poland's daily newspaper Rzeczpospolita by Paulina Wosik from the Department of Competition Protection of Poland's Office of Competition and Consumer Protection. It originally ran on 4 March 2016.

Several articles have recently been published in the press expressing concern about a UOKiK conclusion on the use of Most Favoured Nation (MFN) clauses by the online hotel services sales industry. Because some of the articles have presented unreliable information, we would take this opportunity to clarify what MFN clauses are and to review the steps UOKiK has taken in the case.

MFN clauses are terms contained in agreements between hotels and platforms offering hotel booking services (Online Travel Agents - OTAs) on the basis of which hotels must offer the same or a better price and conditions for a room via OTA platforms compared to those offered by hotels through other channels. Depending on how widely the term „other channels” is defined, two types of MFN clauses can be distinguished: wide MFN clauses, which apply to all online and offline channels in which hotels offer rooms for reservation, and narrow MFN clauses, which apply only to the hotel’s own website.

How UOKiK has approached wide MFN clauses

Measures intended to eliminate wide MFN clauses have been implemented by a number of national competition authorities in Europe, including those of France, Sweden, and Italy. Because there was some concern that wide MFN clauses could infringe provisions of the Polish Competition Act, UOKiK opened preliminary proceedings in December 2014. During the proceedings, the Competition Authority called on OTAs to voluntarily stop using wide MFNs in their agreements with hotels. These clauses specifically banned hotels from offering lower prices through their own offline channels (including reception, telephone, sms, and e-mail) as well as through other OTAs, offering more favourable booking conditions to other OTAs, or making a larger number of rooms available to other OTAs. The OTAs undertook to not apply the clauses, thus eliminating the restrictions hotels faced. The absence of wide MFN clauses benefits consumers because hotels may now freely apply in offline channels lower prices and better booking conditions than those displayed on the OTAs’ websites. Further, consumers can also take advantage of different prices and booking conditions offered on competing OTAs and choose the offer that best suits them.

Satisfied with the OTAs reaction, UOKiK concluded its preliminary proceedings in 2015. Here it should be emphasised that a preliminary proceeding concludes with a resolution which does not state whether an individual enterprise has infringed the Competition Act.

Narrow MFN clauses

In the light of the above, and contrary to information a recent press article presented, the investigation did not end with the President of UOKiK "legitimating a general and indefinite ban on Polish hotels competing on price on their own websites with OTAs”. Further, UOKiK’s resolution did not settle the legality of narrow MFN clauses.

While how narrow MFN clauses work in practice was not the subject of the Competition Authority’s proceedings, we note that their use may reduce the risk of hotels free-riding on investments made by OTAs. The narrow MFN clauses protects the OTA when potential customers check and compare deals on the OTA’s website, but reserve a room directly on the hotel’s website, where they may be offered a lower price. In such cases, hotels gain free advertising while the OTA falls short of the margins it requires to cover operating costs.