A billion dollar fine has been settled in Booking

The antitrust proceedings against the hotel booking service, which began in 2019, ended with a turnover fine of 1.3 billion rubles.
Origin source
The Federal Antimonopoly Service (FAS) imposed a turnover fine of RUB 1.3 billion on Booking.com B.V., registered in the Netherlands, which operates the hotel booking service of the same name, the agency reported on Thursday, August 26.

Booking.com was fined under Part 2 of Art. 14.31 of the Administrative Code (abuse of a dominant position in the market). The service "imposed unfavorable terms of contracts on Russian hotels and hotels," according to which they were obliged to provide companies and observe parity of prices, availability of rooms and conditions in all channels of sales and distribution of their services, the FAS explained.

“We are disappointed with today's decision by the FAS,” the press service of Booking.com told RBC. “We have always contributed to the development of the travel industry and firmly believe that our price parity practice is fair and allows Booking.com to support the travel ecosystem as we have always done,” insists the service representative. According to him, Booking.com will appeal the decision on the fine.

There have already been precedents when the FAS fined large international corporations for violating Russian antimonopoly laws: in August 2016, the agency ordered the American Google structure to pay 438 million rubles. for the fact that the corporation prohibited smartphone manufacturers from installing competitors' applications. Then Yandex complained to Google.

Why FAS opened a case against Booking.com

At the beginning of 2019, Opora Rossii complained about the service to the FAS. She accused Booking.com of the fact that the service requires the hotels cooperating with him to give the best prices only to him: even if the client books the overnight stay directly, the hotel does not have the right to provide him with better rates.

The FAS agreed with the arguments of Opora Rossii and issued a warning to Booking.com in November 2019, demanding that it voluntarily stop violating the Russian law On Protection of Competition. The service did not comply with this warning, so in December 2019, an antitrust case was initiated against Booking.com.

Its consideration was completed a year later - in December 2020. The service was found to be in violation of the law, the service issued an order to Booking.com to waive price parity when working with Russian hotels and other accommodation facilities. At the same time, the FAS estimated the market share of Booking.com in Russia: in its product market, that is, among all aggregators of information about accommodation facilities in Russia, the service occupied almost 80% in value terms and 84% in physical terms.

Commenting on the issued order, Booking.com also indicated in December 2020 that it considers its policy to be fair. Later, he challenged the FAS decision in the Moscow Arbitration Court. The next meeting on this case is scheduled for August 30.

What will be the implications for Booking.com

In terms of the Central Bank's exchange rate on August 26, the fine issued to the service is about $ 17.6 million. For comparison: in the first half of 2021, the revenue of the parent company Booking Holdings, which manages not only the hotel booking service, but also, for example, the tour search engine Kayak , amounted to $ 3.3 billion. True, because of the pandemic, the business is not yet making a profit: the operating loss in January-June was $ 367 million, the net loss was $ 222 million. the company had almost $ 11.3 billion in cash and cash equivalents.

The parent of Booking Holdings has never considered the case filed against Booking.com in Russia as one of the risks for its business. In all of its quarterly reports, the owner of the service never mentioned his dispute with the FAS, although he warns investors about proceedings initiated against her in other countries, for example, in Israel or Germany.

A fine of 1.3 billion rubles. for the owner of Booking.com it will be "not critical and quite feasible in terms of creditworthiness," said Honorary President of the Russian Union of Travel Industry Sergei Shpilko. The fine issued by the FAS "will be noticeable and unpleasant, but not critical for the company," the service will continue to work as usual, the representative of the Federation of Hoteliers and Restaurateurs of Russia agrees.

The recognition of Booking.com's monopoly position in the Russian market may not have any immediate consequences for the market, but in the future it can be taken into account from the point of view of state regulation, Shpilko notes. In his opinion, "the task is not to oust Booking.com from the market, but to create conditions for the development of competition and various digital tools in the Russian travel market."

Now Booking.com, which offers customers not only services for booking accommodation facilities, but also flights, booking excursions and restaurants, and in fact is no different from Russian tour operators, but at the same time the service does not meet the requirements that the law imposes on them, believes Sergey Voytovich, the head of the Svoy tourist service group, who in 2018 proposed to limit the activities of Booking.com in Russia (the Ministry of Culture, who then oversaw the tourism industry, did not support this initiative). Booking.com must be legalized in Russia and meet all the requirements of the law and Rospotrebnadzor, Voitovich is categorical. He recalls that in Turkey the service pays 7% of the turnover to the country's budget for taking advantage of its monopoly position.

Booking.com has a subsidiary in Russia - OOO Bucking.com Rusia, but it, as indicated in the reports, provides only marketing services, as well as support services to Booking.com B.V. for online booking in Russia. The revenue of this legal entity according to RAS in 2020 was 570 million rubles, profit from core activities - 193 million rubles, net profit - 144 million rubles.