Nowadays, it is very common for consumers to book hotel rooms on booking sites. The offer is overwhelming. It is easy to find a quaint little hotel in, say, downtown Amsterdam. Some would even say that it is fun to compare hotels via the internet. Operating an online booking site is big business, which is why online travel agents go to great lengths to keep consumers on their websites. They tend to create a virtual scarcity, by telling consumers that no more rooms are available or that there is only one room left in a particular hotel. The question is whether these practices are in accordance with European consumer law.
’No room available…’
In France, the Paris Commercial Court had to decide whether or not the message “there is no room available during the selected period” on hotels.com, expedia.fr and tripadvisor constituted a misleading commercial practice. In its judgment of 11 October 2011, the Court ruled that the average consumer will not make a distinction between rooms offered on a booking site and by the hotel itself. It was not disputed that the information on the respective websites did not reflect the real situation regarding the availability of a certain Parisian hotel. It was also not disputed that this situation applied to other hotels. According to the Court, it was not proven by Expedia et al. that consumers familiar with international booking systems understand that the contested message only concerns the availability on the particular booking site and not the actual availability of the hotel in question. Consequently, the Court ruled that the contested communication constitutes a misleading commercial practice.
‘We have only 1 room left!’
In the Netherlands, Max Kohnstamm, a marketing expert, complained to the Advertising Code Committee that Booking.com was misleading average consumers when using the advertising texts: “We have only 1 room left!” and “Only 1 room left at € [price]”.
In its decision of 24 April 2014, the Advertising Code Committee first decided that Booking.com must be held accountable for the contested communication on its website. Each particular hotel decides the supply of hotel rooms at a certain price on Booking.com’s website. However, it is Booking.com’s decision to set up its website in such a way that the contested communication (automatically) appears if the supply that the hotel makes available via Booking.com’s website gives reason to do so.
Subsequently, the Advertising Code Committee considered it not adequately clear to the average consumer that the contested communication on Booking.com’s website about the availability of hotel rooms offered at a certain price only relates to the supply that the particular hotel has made available via Booking.com’s website. In fact, there may be a larger supply of hotel rooms than shown on this website. After all, it cannot be ruled out that the same accommodation may also be made available via other channels. Consequently, the Advertising Code Committee ruled that the texts constitute misleading advertising.
Booking.com lodged an appeal with the Appeals Board of the Advertising Code Committee. On 4 July 2014 the Appeals Board upheld the decision of the Advertising Code Committee, disallowing Booking.com’s appeal.
European advertising law
What do the judgment of the Paris Commercial Court and the decision of the Dutch Advertising Code Committee have in common?
The Paris Commercial Court ruled that the message on hotels.com, expedia.fr and tripadvisor was a misleading commercial practice in the sense of article L.121-1 of the Code de la consommation. This article is the implementation of article 6 of the European Unfair Commercial Practices Directive. In the Netherlands, this article is implemented in article 6:193c of the Dutch Civil Code and section 8.2 of the Dutch Advertising Code (the wording of both legal provisions is virtually the same). It was section 8.2 of the Dutch Advertising Code that Booking.com violated according to the Dutch Advertising Code Committee.
What is interesting is that in both cases the use of the contested messages or advertisement texts was found misleading because they de facto violated the same prohibition originating from the European Unfair Commercial Practices Directive. This means that both the judgment of the Paris Commercial Court and the decisions of the Dutch Advertising Code Committee and its Board of Appeal are relevant for online commercial communication in all EU member states.
”best price guarantee”
To top this off, at the end of last year, the Bundeskartellamt (the German national competition authority) decided against HRS (Hotel Reservation Service, a German online travel agent), that price parity clauses in contracts, which online travel agents demand of the hotels, concerning the online offer of hotel rooms – also referred to as “best price guarantee” – may even prevent consumers from looking any further for a different offer for hotel rooms on the internet. After all, because of the best price guarantee, consumers believe that they have been presented with the “best offer” on the booking site they are visiting. Although the Bundeskartellamt’s decision was not given under the European Unfair Commercial Practices Directive, it is nonetheless relevant, as it shows that price parity clauses can reinforce the misleading practice ascertained by both the Paris Commercial Court and Dutch Advertising Code Committee. What is surprising is that neither the Parisian Court nor the Dutch Committee paid any attention to the effect of price parity in their decisions.
The European legislation and case law on unfair commercial practises is aimed at protecting European consumers from misleading advertisements. This protection clearly also extends to the internet. Because websites can be accessed worldwide, online travel agents around the globe – especially those targeting consumers in Europe – may want to think twice before creating virtual scarcity for online sales purposes. Seen this way, European consumers will certainly benefit from the protection offered by the European Unfair Commercial Practices Directive and the case law discussed above. Possibly, consumers worldwide will benefit too…
Joost Becker, lawyer specialising in advertising law
Eric Janssen, lawyer specialising in competition law
Disclaimer: the authors represented mr. Kohnstamm in proceedings before the Board of Appeal of the Dutch Advertising Code Committee, but they wrote this article in a personal capacity.