Marriott, Expedia, Priceline, and other brands escape hotel rate parity suit
Late yesterday a US judge threw out a class action lawsuit over hotel room rate parity that had been brought against 22 household name travel brands, including InterContinental, Expedia, and Priceline.
The judge said there wasn’t enough evidence to justify the argument that several hotel chains and and online travel agencies (OTAs) had used “rate parity” as a conspiracy to raise prices and restrain competition.
“Rate parity” is a term to describe agreements in which hotel chains allow rooms to be listed on OTAs. Hotels and OTAs agreed to make sure there was consistent pricing across channels.
In short, consumers generally see the same rate for the same hotel chain’s room on an OTA as they do as the lowest “best available rate” on a hotel chain’s own site.
Rate parity is ok
The plaintiffs — 24 individuals across 13 states — had made federal and state antitrust and unfair competition claims, saying the hotel brands’ “price match guarantees” were a conspiracy to fix prices for rooms at inflated rates for consumers. (See the main complaint, here.)
The practice allows OTAs to essentially buy rooms from the hotels and resell them to consumers while hotels in effect control the resell rates, the plaintiffs asserted.
Wrote US District Judge Jane Boyle in Dallas:
“True, both the hotel and OTA defendants would benefit from the elimination of price competition in the sale of hotel rooms online.
But these ‘common motives’ just as well explain why hotel defendants (because each wanted to control online prices for its own rooms) and OTA defendants (because each wanted an assurance the minimum price it must publish would not be undercut) individually entered into [resale price maintenance] agreements.
According to the complaint, the rate parity guarantees prevent companies such as Skoosh.com, a UK travel booking site, from entering the market and attempting to gain share by discounting room prices below the price matches as a loss leader.
Just because defendants’ rational business interests can be recast in a suspicious light does not mean the allegations actually suggest a conspiracy was formed.”
In other words, the travel brands are just competitors in an incestuous business, according to the judge. There was no actual e-mail or phone call proof that, say, Marriott and Hyatt were colluding to fix room rates.
Executives from some of the defendant companies attended industry-wide EyeforTravel conferences in the US from 2004 to 2008, providing an opportunity to conspire.
But there was no “smoking gun” communication.
The judge added that the plaintiffs’ alleged injury — payment of supracompetitive prices — has no plausible connection to the rate guarantees, and that they failed to show that “rate parity” reduces intrabrand competition by requiring the OTAs to market a hotel’s rooms at the rates set by that hotel.
With his game face on, one of the firms representing the travel brands — Hagens Berman Sobol Shapiro — said it felt it could replead the complaint. The judge has given the firms 30 days to do so, according to Bloomberg News.
But if they don’t succeed, hotels will be able to assume they have the right to set rates for their own rooms no matter the distribution platform, as well as continue to pursue individual agreements with OTAs.
The US Department of Justice refused to investigate the alleged conspiracy in 2010.
Skoosh had more luck in its home turf in Britain where the Office of Fair Trading took up the case and issued a statement of objections against Expedia, Priceline, Booking.com last July.
Ironically, the practice of rate parity has fallen on hard times with the rise of mobile booking apps, which are typically considered to fall outside of the guarantees.
According to the filing: OTAs produce as much as 50% of US hotels’ room reservation “traffic”. But that doesn’t account for the rise of mobile devices and related booking platforms.
Brands are increasingly competing against themselves, as they post different rates in different channels.
EARLIER ON TNOOZ: “Hotel price fixing case will likely do little but generate legal fee bonanza“
Sean O’Neill is a New Jersey-based reporter for Tnooz. He is also a daily contributor of consumer news to LonelyPlanet.com.
He used to work for BBC Travel, BudgetTravel.com, and Kiplinger's, and used to live in London, New York City, and Washington, DC.