The Office of Fair Trading has opened a consultation on revised commitments proposed by Booking.com, Expedia and InterContinental Hotels Group.
The OFT said that it was confident that the revised commitments “should inject a meaningful degree of price competition into the online offering of hotel bookings”.
The consultation comes after the OFT accused the three of infringing competition law in July 2012. At the time the OFT said that Booking.com and Expedia “each entered into separate arrangements with IHG which restricted the online travel agent's ability to discount the price of room-only hotel accommodation”.
The OFT announced in August this year that it was consulting on draft commitments proposed by the three businesses as a means of addressing the OFT's competition concerns, and invited comments from third parties such as other businesses and consumers.
The draft commitments included allowing OTAs to provide discounts funded by their commission revenue or margin. OTAs would be free to use their commission revenue or margin to fund discounts to consumers in “closed groups” such as membership or loyalty schemes. The users would have had to joined the closed group and have been to that particular hotel at least once before.
The OFT admitted at the time that the commitments would not completely remove the restrictions on OTA discounting that currently exist in IHG’s agreements with Booking.com and Expedia, with the parties arguing that the restrictions were necessary to realise certain “efficiencies”.
As a result of the consultation and further developments, the OFT currently considers that the original commitments address its competition concerns, subject to the following amendments which the parties have offered, including; clarifying that hotels would be allowed to offer discounts in an equivalent manner to OTAs, that the commitments would apply to bookings made by European Economic Area residents for rooms in UK hotels, rather than to bookings made by UK residents for rooms in EU hotels and that the commitments would apply for a period of two years, rather than three years.
Senior director in the OFT's services, infrastructure and public markets group, Ann Pope, said: "The OFT considers that these revised commitments should inject a meaningful degree of price competition into the online offering of hotel bookings. We would now like to hear the views of interested third parties, in particular on the amendments being proposed.”
Anyone wishing to comment on the revised commitments should submit views to the OFT by 17 January.
Expedia is also currently under investigation in the US, alongside Starwood Hotels & Resorts, Hotels.com, Travelocity.com, Booking.com, Priceline.com, Orbitz Worldwide, IHG, Marriott International, Trump International Hotels Management and Hilton Worldwide. The group last month asked a federal judge to dismiss a lawsuit in which they are accused of conspiring to fix prices for rooms.
The plaintiffs claimed that the accused made agreements barring the hotels from selling rooms for less than the participating travel agents charged, artificially forcing prices up. The complaint read: “The defendants’ ‘best price’ or ‘best rate’ guarantees are nothing more than a cover for their conspiracy to fix prices. There is in reality no ‘best price,’ but instead consumers are offered a fixed uniform price.”
Bloomberg quotes the defendants’ lawyers as saying: “There is nothing anticompetitive, much less unlawful, about a hotel setting specific pricing terms for its distributors so that it competes effectively with other hotels. Plaintiffs assert the novel proposition that a hotel must compete against itself.”
HA Perspective: [by Katherine Doggrell] This latest amendment to the commitments the trio have made to the OFT marks a watering down from the original offer, with the time they will run cut from three years to two years. This, when the commitments did not equate to a wholesale throwing up of the hands and total revision of policy in the first place.
Amongst the commitments was one to allow online travel sites to use their commissions or margins to offer discounts to certain qualified consumers, such as loyalty programme participants. This has been amended to clarify that hotels will be permitted to offer discounts on the same terms. But even under the new commitments, discounting is not available to all, but to members of closed groups. Not being part of these groups means that price parity remains for the casual hotel booker.
In a case which it was hoped would clarify rate parity and support the consumer in finding the best rate most easily, the result is that the OFT has instead ensured that this confusing landscape will continue.
The good news is that other jurisdictions in the EU, such as France and Germany, are being more vociferous in their actions against rate parity and any rulings made there which cover the OTAs may be adopted by them in the UK under wider regional law.