dollar hit
2 years ago
 

Hotel price fixing saga switches to the US with class action against Expedia and others

There is a whiff of anger in the air, it appears, over alleged price fixing between online travel agencies and hotels – with a class action being brought against some of the biggest travel brands on the planet in the US.

Documents filed in a California court yesterday by two individuals, Nikita Turik and Eric Balk, and on behalf of unnamed others outline an antitrust charge against a string of hotel brands and OTAs for what they allege is maintaining or reinforcing so-called minimum price maintenance (RPM).

The websites and companies cited are:

  • Expedia
  • Hotels.com
  • Travelocity
  • Sabre Holdings
  • Booking.com
  • Priceline
  • Orbitz Worldwide
  • Hilton Worldwide
  • Starwood Hotels and Resorts Worldwide
  • Marriott International
  • Trump International Hotels
  • Kimpton Hotel and Restaurant Group
  • InterContinental Hotels Group

The action (headed by law firm Hagens Berman Sobol Shapiro) claims OTAs “conspired” with hotel chains to create an RMP scheme that would “fix the retail price for room reservations” and therefore impact competition in the marketplace for other intermediaries.

The documents state that the OTAs are accused of leveraging their “substantial market power and dominance” to “induce” hotel chains to agreeing to participate on one of the following:

  • Impose minimum resale price maintenance agreements on retailers.
  • Enforce hotel-retailer agreements.
  • Refuse to supply or cut off supply [product] to other competing retailers wishing to discount product.
The class action comes just three weeks after a UK regulator issued a “statement of objections” to Expedia, Booking.com and InterContinental, alleging the two OTAs entered in to individual agreements with the hotel giant which “restricted the online travel agency’s ability to discount the price of room-only accommodation”.
While such arrangements refer to the OTAs ability to discount, wider marketplace issues are at the centre of the complaint as the alleged deals restrict other OTAs with their ability (or not) to discount hotel rates on their own sites.
The US case is essentially covering off the same ground, but the language in the class action is far more wide ranging than the current terms of reference outlined by the OFT.The companies cited in the class action are accused of being joined by others (unnamed so far) in what is said to be an industry wide conspiracy.

Sabre is also singled out as having “admitted” the scheme takes place, quoting a top PR official as saying (and here) it is “standard industry practice”.

It is performed in part “so that the customer can have the confidence that they will get the best rate, that they don’t have to go on 18 difference sites”, the documents outline.

The plaintiffs in the US case, Turik and Balk, are consumers based in Illinois and Iowa respectively.

NB: Dollar bash image via Shutterstock.

NB2: Requests for comment from a number of the defendants have not been returned.

 
 
Kevin May

About the Writer :: Kevin May

Kevin May is editor and a co-founder of Tnooz. He was previously editor of UK-based magazine Travolution for nearly four years and web editor of Media Week UK from 2003 to 2005.

He has also worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology and a postgraduate diploma in magazine journalism.

 

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  1. Gabriele

    Hello.

    Dorian’s suggestion is clearly right. Patrick, when you speak to the Irish competition authority, you may also point to the fact that other competition authorities are also looking at similar practices. Besides the UK, practices have been investigated in Germany, Switzerland and Lithuania (the competition commission in Lithuania has already issued a fining decision). I attach the links to the press releases of these authorities, so that you may print/forward them:

    Germany: http://www.bundeskartellamt.de/wEnglisch/download/pdf/Presse/2012/2012-02-10_PR_HRS_E.pdf

    Switzerland: http://www.news.admin.ch/NSBSubscriber/message/attachments/29060.pdf

    Lithuania: http://kt.gov.lt/en/index.php?show=news_view&pr_id=1016

    Good luck and kind regards
    Gabriele

     
  2. Dorian

    Patrick, you can speak to the Irish competition office. They’re already aware of the situation and the more cases they hear the quicker they’ll take action.

     
  3. Patrick Ireland

    Here in Ireland small and medium sized hotels and guesthouses in particular are in a strangle hold by these multi-national bully boys, small businesses are being threatened with being de-listed if they offer incentives such as free breakfast, because Ireland is a small Island these corporate bullies appear to have a great deal of power as they are spending millions on advertising and dominate the online trade, small businesses are being squeezed with many going into liquidation because of the excessive commissions being charged, what can we do to fight back?

     
  4. flauser

    I heard one of the firms leading the hotel room rate class action is Gilman Law LLP. Their website is http://www.gilmanlawllp.com for those who want to become part of the class.

     
  5. chris

    Need to disagree Alan. I once used travel agents, they have no transparency. I once went to 2 travel agents from the same company in 2 shopping centres. same itinerary, 2 prices 2 thousand dollars difference. At least with OTA’s I can check the price and know that’s the same price everyone else is seeing as well.

     
  6. Alan Wilman

    Get the truth – trust a travel agent! The online merchants are always trying to con the innocent consumer – hope the law finds them guilty and slams them with a very hefty fine….until the next time!

     
  7. Dorian

    Robert, whilst the case may have been misinterpreted in the press we can assume Hagens Berman are more than aware of the law. They’re one of the leading firms in the U.S. and have taken on many similar size cases and won.

    This is good news for hotels. They should never have involved themselves in rate parity in the first place (neither voluntarily, not under duress). Once it is outlawed, they’ll have much better control over how they price their rooms in relation to their distributors and will no longer be shackled to the same price.

     
  8. RobertKCole

    Reading the complaint, there are numerous errors of fact that create the impression that the plaintiff’s legal team is relatively unfamiliar with the workings of the hotel industry and online hotel distribution.

    US law, which is much softer on Resale Price Maintenance than Europe, considers vertical price restraints as not per se unlawful but something to be judged under the “rule of reason.” The classic scenarios used to describe how RPM restrains trade do not apply to hotel industry processes and outcomes, so the industry should be able to defend itself.

    The UK opinion from the Office of Fair Trading seems to be more along the lines of a strict “per se” assessment, although EU courts conceptually allow suppliers to rebut claims to prove a particular method of RPM in a particular industry does not disadvantage consumers or retailers.

    That said, the hotel chains and OTAs may run into some trouble with the specific language used in various agreements to define the mechanics of the resale price maintenance.

    One particular concern should be that many OTAs have vested interests in eliminating rate parity to gain competitive advantage over the hoteliers. As a result, all the defendants in this case may not share a common interest in mounting a successful defense.

    I suggest that the hotel groups lawyer up and prepare for an important battle – regardless of how frivolous or open-shut they may feel the case is. Losing this case is a big deal.

    The elimination of hotel rate parity doesn’t just change the rules, it changes the whole playing field – and not in a way that is favorable to suppliers of a variably priced, non-inventoriable, time-sensitive service like hotel stays.

     
    • Gabriele

      Robert, I may agree that the complaint could have been slightly better. There is a bit of everything. If the court is willing to nail down the OTA it may also take issue with horizontal price fixing, as also argued in passing in the complaint. That is still per se prohibited in the US. That said, I agree that in the EU in the may be a different story. Btw, interestingly there is a EU business directly involved in the US case. This is the magic of online business. No matter where your business’s main seat is, your market is the world. So the potential legal liabilities! Regards, Gabriele

       
  9. Roman Peskin

    That’s going to be interesting to watch…
    As much as I resent this whole “rate parity guarantee” I have to say there is no ‘parity’ on the market.
    It’s more or a ‘parody’ than ‘parity’ :)

    According to our data only in 7% of cases hotels rates don’t differ across channels. The rest 93% of the rates differ for over 5% across channels while over 50% being are in total disparity (30% difference and more).

    It is obvious that while most OTA have legal framework in their contracts with hotels to enforce rate parity, they fail to do so.

     
  10. Jonathan

    It will be interesting to see how this lawsuit progresses. I don’t think anyone would disagree that there are ‘price parity’ issues that come into play when displaying hotel rates to consumers. Whether this will pass muster as acceptable by the courts remains to be seen.

    There is the potential that a ruling for the plaintiffs in this case could significantly change the hotel pricing landscape. I It appears to me that there is a lot at stake for the established industry players. It will be interesting to see how the case unfolds.

     
    • Ryan C Haynes -

      And how hotels then reeducate themselves on how to deal with OTAs without Rate Parity. They’re only just getting used to it.

      How will contract look? What will BAR mean? How innovative will hotel product packages become…?

      Exciting

       
 
 

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