Small hotels will be able to set their own prices to help them compete with online travel giants Expedia and Booking.com if Labor wins the federal election.
Under current laws, so-called price parity clauses mean small businesses cannot offer discounts or deals on their own sites if they also advertise on larger platforms.
Expedia and Booking.com control about 85 per cent of online accommodation bookings in Australia, with up to 30 per cent of booking fees going to the multinationals.
Labor's competition spokesman Andrew Leigh said the clauses had been hurting local accommodation providers.
"We don't think that that's appropriate, to have that amount of revenue going to a multinational platform, which is effectively then saying to the hotel 'you're not allowed to offer a better rate on your own website'," he said.
"They've got them over a barrel at the moment. We don't think that's fair."
The clauses have been banned in European countries including Germany, Italy, France, Sweden, Belgium, and Austria.
A Shorten Labor government would also direct the competition watchdog to investigate the use of such clauses across other platforms and industries.
Small Business and Family Enterprise Ombudsman, Kate Carnell, welcomed Labor's proposal.
"Addressing anti-competitive practices would level the playing field between small businesses and their multinational rivals and give consumers more choice," she said.
She said beyond the accommodation sector, there were "acute challenges" for restaurants with the costs of being on the UberEats platform.
A government review of unfair contract term protections for small business is due shortly.
