Jurisdiction clarified: International online travel agencies can be sued in Germany for infringement of competition law

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On 24 November, the European Court of Justice (ECJ) issued its long-awaited judgment in the “Wikingerhof” case (ref. C-59/19), which had had the German hotel industry on tenterhooks. Although the name might suggest it had something to do with Vikings, the case was actually about the market power of foreign booking portals. The ECJ concluded that hoteliers may in future enforce their legal claims against these portals in their home country.

Image: Unsplash

What was the case about?

Like so many other hotels, the Hotel Wikingerhof, located in the far northern reaches of Germany, concluded a contract with the Dutch company Booking.com BV to act as an intermediary for room bookings. As usual, the contract came from Booking.com, whose general terms and conditions (GTC) were part of the contract. According to Booking.com’s GTC, the courts of Amsterdam have exclusive territorial jurisdiction to hear disputes arising from the agreement. Dutch law is also applicable.

Subsequently, a dispute arose between the contracting parties: the hotel accused Booking.com of exploiting its dominant position and thus violating competition law. In particular, it took issue with the booking portal’s practice of advertising the rates specified by the hotel as discounted, without Wikingerhof’s consent, of withholding customers’ contact details, and of demanding higher commission in return for an improved search request ranking. It was argued that, due to the market power of Booking.com, hotels had no option but to agree to these requirements.

Booking.com wasn’t fazed by this. This is why the hotel, with the support of the German Hotel Association (IHA), sought an injunction before a regional court, the Landgericht Kiel. Booking.com objected, arguing that since this was a contractual dispute, the regional court did not have jurisdiction and the action would have to be brought in Amsterdam.

Both the Landgericht Kiel and the Higher Regional Court of Schleswig agreed with this line of argument; according to the courts, Booking.com’s conduct could be covered by the contract. However, Germany’s Federal Court of Justice (BGH) stayed the proceedings and referred them to the ECJ for a ruling.

What did the ECJ rule?

The ECJ had to determine whether the action came within the original court’s jurisdiction in matters relating to tort, delict or quasi-delict within the meaning of point 2 of Art. 7 of Regulation No 1215/2012.

In principle, a person must be sued in the country in which they are domiciled. However, Article 7(2) of the Regulation provides for an EU-wide exception to this rule: were the proceedings related to tort, it would also be possible to bring an action in the place where the harmful event occurred. So the ECJ had to rule whether the case involved only contractual claims between the parties or whether a tort could also be considered.

A tort is characterised by a violation of legal obligations. The defendant’s liability is therefore derived directly from the law and irrespective of whether or not a contract exists between the parties. In this case, there is no need to examine the content of any existing contractual relationship. A classic example of this is damage to property or bodily injury during a road accident.

By contrast, contractual claims are characterised by the fact that one party undertakes to behave in a certain way towards the other. If the parties dispute whether or not certain conduct is lawful, then it is the job of the court to interpret the underlying contract.

In this case, the hotel accused Booking.com of abusing its dominant position. This could prove to be a violation of German and European competition law. Under the respective laws, violations of competition law result in direct prohibitions and liability implications. The parties are not permitted to contractually exclude or bypass these consequences. These legal claims are therefore based on tort.

This means the German courts have jurisdiction and may also apply German law.

What happens next?

The ECJ did not rule on the dispute, but referred it back to Germany’s BGH. This will in turn refer the matter back to Schleswig-Holstein: since the question of jurisdiction has now been clarified, the Higher Regional Court of Schleswig must now deal with the question of whether or not the actions complained of actually violate the law. It is even possible that the case will be returned to the Landgericht Kiel in the first instance, if evidence still has to be taken.

What does this mean for German hotels?

Hoteliers should be pleased about the ECJ’s decision. It will make it easier for German companies to effectively enforce their rights against international booking platforms: in the past, if a hotel took offence at such a platform’s business practices and considered them misleading, for example, the platform would merely draw the hotel’s attention to the choice of law clause in their contract. This usually means suing in a foreign country with an unfamiliar legal system and at times prohibitive legal costs. Many hoteliers can neither afford nor want to take the risk associated with such a lawsuit. The ECJ has now made it clear that action can also be taken in Germany in such cases. This threat alone will hopefully be an incentive for the big players to abide by the law in this country in the future.

Selected jurisdiction clauses of international OTAs

Portal

Competent court

Applicable law

Booking.com BV

Amsterdam

Netherlands

Expedia, Inc.

England

England

Tripadvisor

Massachusetts, US

Massachusetts, US

Agoda Company Pte. Ltd.

Singapore

Singapore

HomeAway

Dublin

Ireland

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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