LUXEMBOURG (CN) — The travel company Booking.com is based in Amsterdam, but it will have to go south of the border to fend off a German hotel’s lawsuit, the EU’s high court held on Tuesday.
Located in the northern Germany city of Kroppe, the hotel Wikingerhof began doing business with Booking.com in 2009, signing a contract to offer its 65 rooms on the reservation website. In 2015, Booking.com changed its terms and conditions. The hotel protested some of the changes but argued it was forced to agree with them, as Booking.com is too big of a player in the online reservation market to leave the website.
Ultimately Wikingerhof sued in a German court, claiming that Booking.com had abused its market position by forcing the hotel to adopt unfair practices. Germany has comparatively strict competition regulations, and its Federal Cartel Office can investigate companies that have a “dominant market position” and assess if they are abusing their power.
Objecting to the lawsuit, however, Booking.com asserted that German courts lacked authority to rule on the case as its contract with Wikingerhof required all disputes over the contract to be brought in a Dutch court.
Ultimately, the German high court, Federal Court of Justice, referred the matter to the European Court of Justice. Under the so-called Brussels Regime, which determines legal jurisdiction in the EU, companies generally must be sued in the country where they are headquartered.
“The legal issue at the heart of the case in the main proceedings is whether Booking.com committed an abuse of a dominant position within the meaning of German competition law,” the Luxembourg-based court wrote Tuesday.
Finding that the hotel was right to bring the case in Germany, the Grand Chamber determined that the case turns not on the contract, which would make the Netherlands the proper venue, but “matters relating to tort, delict or quasi-delict,” which relies on German law.
“In the present case, Wikingerhof relies, in its application, on an infringement of German competition law, which lays down a general prohibition of abuse of a dominant position, independently of any contract or other voluntary commitment,” the 13-judge panel found.
In previous cases, the court has held that disputes involving negligence —tort, delict or quasi-delict, in legal parlance — can be adjudicated in the country where the negligence occurs. Just this past July, the Court of Justice held in a negligence case that the Austria-based consumer rights group VKI could sue German car maker Volkswagen in Austria for its dieselgate emissions scandal.
Founded in 1996, Booking.com is the largest European online travel agency. In Europe, 67.7% of online hotel reservations are made through its website. American Expedia holds the second biggest position in Europe, with 12.8%.
“We are disappointed with the decision of the European Court of Justice which puts at risk jurisdictional matters and contractual freedom,” Booking.com said in an email reacting to Tuesday’s decision. Wikingerhof did not immediately respond to a request for comment.
The Covid-19 pandemic has hit the tourism industry hard. In August, Booking.com announced it would lay off more than 4,000 employees, about 25% of its global workforce. According to Booking.com, reservations on the site have dropped by more than 80% since the outbreak began.
The case now returns to the German court for a ruling on the anti-competition allegations.