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Danhostel´s system of maximum prices

29. november 2006

4/0120-0289-0033/SEK/DRP The Council meeting 29th November 2006

On November the 29th 2006 the Danish Competition Council decided to make obligations provided by Danhostel binding on Danhostel according to section 16a in The Danish Competition Act.

In may 2006 the National Association of Danish youth hostels, Danhostel addressed The Danish Competition Authority about Danhostel´s system of maximum prices for bed-nights in youth hostels.

Danhostel uses/applies a system of maximum prices for bed-nights. Danhostel´s Board fixes the maximum prices pr. bed-night in common rooms and family rooms. The individual youth hostels are allowed to fix their own individual prices pr. bed-night pr. bed/room within the maximum prices. The Board fixes different maximum prices for the different types of bed-nights. Thus, there is one maximum price for bednights in common rooms and another for bed-nights in family rooms. However, the maximum prices for the different types of bed-nights are the same for all the youth hostels irrespective of the classification of the youth hostels.

It was found that it was possible to define to different product markets: One market for bed-nights in 3-5 star hotels and inns, 4-5 star youth hostels and holiday centres, and another for bed-nights in 1-3 star youth hostels.

The Danish Competition Authority examined the prices and expressed concern that Danhostel´s system of maximum prices could standardize prices and thus could have the effect of restricting competition in contravention of section 6 subsection (1) cf. subsection (2)(i) cf. subsection (3) in The Danish Competition Act.

Furthermore, concern was expressed that the conditions in section 8 subsection (1) in The Danish Competition Act were not fulfilled. According to section 8 subsec-tion (1) the prohibition under section 6 (1) shall not apply if an agreement between undertakings, decisions made by an association of undertakings, or concerted practices between undertakings

i. contribute to improving the efficiency of production or distribution of goods or services or to promoting technical or economic progress; ii. allow the consumers a fair share of the resulting benefits; iii. do not impose on the undertakings restrictions which are not indispensable to the attainment of these objectives; and iv. do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question.

To meet the above mentioned concerns, Danhostel has provided the obligations that Danhostel will put the application of any system of maximum prices to an end as of the 1st of January 2007. Hence, Danhostel will no longer apply the system of maximum prices for bed-nights as described above.

The Danish Competition Council found that Danhostel´s obligations met the concerns of the Council in relation to section 6 subsection (1) cf. subsection (2)(i) cf. subsection (3) in The Danish Competition Act. Therefore, the Council made the obligations binding on Danhostel as from the 1st of January 2007.