HOTELS X ONLINE TRAVEL AGENCIES 501 Its two most pointed out negative effects on competition are, firstly, the cooling of the competition among OTAs, with the homogenisation of prices, because a hotel would not be stimulated to get better trading conditions and offer lower prices on one specific platform if also has to offer equal prices to others. This cooling’s most visible practical effect is that the hotels end up offering their rooms for the same prices on the platforms of all OTAs, which leads to the second effect, raising the barriers to the entry in the market of new OTAs with lower commission rates or lower prices on their platforms. That is, the practice of parity clauses would make it impossible to offer the consumers final prices more attractive than the ones of their competitors, on the platform of a new entrant who is willing to charge lower commissions in order to conquer new hotels, because they are prevented from offering lower prices. For example, if the hotel offers the daily rate through one of those paths for 100.00 R$ with 15% commission, it receives the new value of 85.00 R$, and if a competing OTA proposes an 8% commission, the same daily rate could be offered by it for 92.40 R$, and the hotel would receive the same 85.00 R$ net. Or it could offer the daily rate for 95.00 R$ and, after deducting the 8% (76.00 R$), there would remain 87.40 R$ for the hotel, where, without the parity, a competing OTA, charging less commission, can offer a lower final daily rate to the consumer (95.00 R$ x 100.00 R$) and a higher net daily rate to the hotel (87.40 R$ x 85.00 R$). This is a better outcome for users on both sides of the booking platform, fostering the competition between these platforms by both the end-customer and the lodging providers7. According to its scope, a form of parity clause is the one of wide-clause, currently prevailingin Brazil, which prohibits the hotel from offering i) lower prices, ii) a greater availability of rooms, or iii) more advantageous conditions in another OTA, competitor or in their own sales channels, online or offline. It is understood as the most advantageous condition any service or product that adds value to the pure booking of a room, such as cancellation conditions and the inclusion of breakfast or free wi-fi. The other form of reduced scope parity clause, usually called narrow clause, also prevents the hotel from offering rooms at a lower price (or conditions) 7 The possibility of consumers on both sides of a platform trading for others (multi-sided platforms), known as multi-homing effect. More information: EVANS, David S. The Antitrust Economics of Multi-sided Platform Markets. Yale Journal of Regulation. Vol. 20, Issue 2: 2003).
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