Bulgaria: CPC deems minimum hotel accommodation prices anti-competitive

12 June 2018 | newsletters

The Ministry of Tourism recently proposed the introduction of minimum prices for sites categorised as 'accommodation places'. In Decision 529/10.05.2018, the Commission for Protection of Competition (CPC) opined on the proposal's compliance with competition rules.

The CPC held that setting minimum prices for accommodation places would limit price competition between hotels. Minimum prices cannot guarantee:

the quality of a site or its compliance with the category 'hotels'; or
that hoteliers will invest the extra profit in improvements to the quality of their services.

The CPC highlighted the fact that accommodation prices depend on many factors other than category, which makes it practically impossible to set a minimum price for a category that would be adequate in every case. Prices should be fixed in line with natural market mechanisms, which reflect the correlation between supply and demand. Recent Ministry of Tourism hotel occupancy data shows a steady and significant fall in accommodation capacity and an oversupply of rooms.

Effective competition does not mean maintaining ineffective market players. The aim of competition is to stimulate efficiency and attract more customers by offering high-quality services at low prices. Maintaining ineffective hotels should not be at the expense of consumers. In addition, setting minimum prices will likely lead to an outflow of tourists and thus a reduction in hotel revenues (ie, the opposite of what competition aims to achieve).

According to the CPC, setting minimum prices for sites categorised as accommodation places achieves no regulatory goals. Moreover, there are alternative mechanisms for achieving these goals without restricting competition. High-quality accommodation services can be provided by checking compliance against category requirements.

Further, the introduction of the Unified Tourist Information System in the grey market is expected to allow real-time data exchange through protected channels between: