By Foo Yun Chee

BRUSSELS (Reuters) - Booking.com's restrictions against hotels offering lower rates on their websites or on rival sites are unnecessary and could reduce competition, Europe's top court said on Thursday in a ruling targeting a widely used practice in the industry.

They also said, however, they were not anti-competitive under European Union (EU) law.

Known as parity clauses and inserted into contracts between online booking sites and hotels, the practice has triggered complaints by competitors and scrutiny from regulators across Europe concerned they are a bad thing for consumers.

Germany's antitrust watchdog has banned such clauses whether they apply to hotels' websites or rival accommodation sites while regulators for the EU as a whole allow such curbs only for hotels' own sites.

Landmark rules known as the Digital Markets Act that came into force last year ban large online platforms, which would include Booking.com, from using wide or narrow retail parity clauses or equivalent commercial measures.

The Luxembourg-based Court of Justice of the European Union (CJEU) said there was no evidence to justify them.

"It has not been established that price parity clauses, whether wide or narrow, first, are objectively necessary for the implementation of that main operation and, second, are proportionate to the objective pursued by it," judges said.

They said the restrictions may reduce competition between various hotel reservation platforms, force out small platforms and new entrants and do not appear to be necessary to ensure Booking.com's economic viability.

However the court also said that the clauses cannot be considered anti-competitive under EU antitrust laws.

"Price parity clauses cannot, in principle, be classified as 'ancillary restraints' for the purposes of EU competition law," the CJEU said.

The case involving the unit of New York-listed Booking Holdings came after the company applied for a declaration on whether parity clauses are valid, prompting a Dutch court to seek guidance from the CJEU.

The case is C-264/23 Booking.com and Booking.com (Deutschland).

(Reporting by Foo Yun Chee; editing by Barbara Lewis)