Most-Favored-Nation Clauses: The questions left by the Booking Case

Booking.com is a technology company engaged in intermediating travel and lodging services over the internet. For more than a decade, there has been worldwide debate over the company’s use of most-favored-nation clauses (MFNs) imposed on providers of such services which, while not inherently unlawful, can produce anticompetitive effects in certain markets.

In practice, these clauses have limited lodging providers’ ability to offer lower prices through other channels, whether competing travel agencies or their own websites.

A few weeks ago, the Tribunal de Defensa de la Libre Competencia (TDLC, Competition Tribunal) approved an out-of-court settlement in Chile between Booking and the Fiscalía Nacional Económica (FNE, National Economic Prosecutor’s Office), ending an investigation opened in January 2024 following the FNE’s Lodging Market Study published that same year. In that proceeding, the authority found that Booking included MFN clauses in its contracts with hotels and other lodging providers that prevented them from offering lower prices through other sales channels, whether other platforms, agencies, or their own websites.

These clauses had been in place since 2009 in Booking’s general terms and conditions, and were also required to access loyalty programs such as Preferred Partner, Preferred Plus and Genius.

The agreement reached between the FNE and Booking includes, among other measures, the unilateral and irrevocable waiver of these clauses, a prohibition on imposing them in the future, as well as any commercial practice or condition that limits lodging providers’ ability to offer lower prices through other channels, whether online or offline. It also established an obligation to notify each lodging provider of the new terms, and payment of US$6 million to the Chilean treasury.

Despite the progress this agreement represents, significant questions remain from a public policy standpoint: Are these measures sufficient to establish a new competitive framework in the affected industry? Do they have a real deterrent effect, given that financial penalties may be low relative to the benefits derived from anticompetitive conduct in highly concentrated digital markets? In Spain, for example, a fine of over €413 million was imposed for the use of these clauses, on the grounds that they constituted an abuse of a dominant position.

In practice, there is worldwide evidence that MFN or “parity” clauses are typically challenged when they unduly protect a platform’s dominant position, raise final prices for users, and/or make it harder for new providers or online sales channels to enter the market.

This raises the question of whether a system like Chile’s, which is predominantly ex post, should be complemented with preventive mechanisms that allow oversight of the use of commonly applied clauses like those at issue here, with the aim of reducing the incidence of unilateral conduct of this kind by platforms with market power.

While any progress on this front should, in principle, be assessed on a case-by-case basis, the establishment of minimum criteria by competition authorities could help generate greater certainty and predictability, making it possible to anticipate and prevent a greater number of demonstrably risky situations in the context of digital markets.

Opinion column published on El Mercurio Legal.