5 years ago
 

Regulator accuses Expedia, Booking.com and IHG in hotel competition infringement probe

Two years in the making, UK regulator The Office of Fair Trading has cited Expedia, Booking.com and InterContinental Hotels in its investigation into fixing hotel rates.

The OFT issued what is known as a “statement of objections” to the trio this morning, 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 practices are “anti-competitive”, says the OFT, limiting price competition between agencies and “increase barriers to entry and expansion” for other players.

The probe was triggered in September 2010 when UK-based hotel booking site Skoosh made a formal complaint to the OFT after a very public battle with Booking.com over rate parity on hotel room sales and disclosing how it had been pressured by hoteliers to stop offering bookings at lower levels than the larger OTAs.

While all parties have always trodden carefully around the legal language, Skoosh has consistently maintained that the practice is essentially “price fixing”.

The OFT’s move today does not formally charge the trio with any offence under UK Competition Act of 1998, but CEO Clive Maxwell says the regulator’s provisional view is that the two OTAs and IHG have “infringed competition law”.

Each has three months to respond to the Statement of Objections, although the OFT has disclosed that Expedia has applied for what is known as “Type B immunity”, meaning it will get leniency for helping the OFT with its investigation.

The maximum penalty for any company found guilty of breaching competition law is a fine of 10% of worldwide revenues – potentially a sizeable sum of money for Booking.com owner Priceline and IHG.

An Expedia official in a statement acknowledged the latest development as a “further procedural step”, adding:

“The SO (Statement of Objections) does not establish that any laws have in fact been broken. Expedia will now review the SO and provide its response to the OFT in due course. For obvious reasons, Expedia is unable to comment further at this stage.

“Expedia remains committed to ensuring that it provides consumers with the widest possible choice of travel options at competitive prices and will seek to safeguard its ability to continue to do so in relation to the current regulatory process.”

IHG says it is cooperating fully with the investigation:

“IHG considers its arrangements with the online booking agents to be compliant with competition laws and consistent with the long-standing approach of the global hotel industry.”

Booking.com says it disagrees with the allegations from the OFT and it will “content them vigorously”.

“Booking.com runs an agency model hotel reservation platform in which hotels have complete discretion and control over setting the prices that appear on the Booking.com website.

“Booking.com is a facilitator of hotel room reservations, not a reseller of hotel rooms.  Because Booking.com plays no role in price setting, does not control hotel pricing and does not resell hotel rooms, it does not believe that it engages in the conduct alleged in the SO.

“Regardless of the outcome of this inquiry, Booking.com remains committed to helping its customers find quality hotel rooms around the world at the best prices possible.”

A statement from Skoosh says:

“Price-fixing has been endemic in the hotel industry for years now. It’s created a Mafia-style atmosphere and an intolerable climate for new businesses. Skoosh has been directly threatened and, in turn, has defended its right to discount hotel prices.

“Our two year campaign for a better commercial environment has evolved into this landmark case. The statement from the OFT should serve as a wake-up call to big corporations that bargain-hunting is a fundamental right of the consumer.”

NB: Hotel door sign image via Shutterstock.

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Kevin May

About the Writer :: Kevin May

Kevin May was a co-founder and member of the editorial team from September 2009 to June 2017.

 

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  1. Murray Harrold

    Never heard of Skoosh. Wasn’t there some other outfit, a while back, trying to make a name for itself by having a pop at the big names? This may be some new way of making a name for oneself – if you can’t cut the mustard by selling product, try and do it by making a name through generally crying “foul” to anyone daft enough to listen.

    I suggest selling hotels at IT rates is a bit of a smokescreen. Hotels do that themselves when their backs are against the wall. In any event, should not IT rates only be available to IT operators? If Skoosh has their hands on IT rates … someone must have given those rates to them.

    There is one element of this which is interesting, which has been a concern for many years. Quite a few moons past, many areas of travel started to go all gooey-eyed at anything online – give up traditional sales avenues, (eg agents etc), get online and distribution costs will disappear and sales will rocket. Well, not quite. In a time long past (BC – Before Computers) distribution was through many varied small outlets. Whilst so, the supplier can divide and rule. Online, especially through people throwing silly amounts of money at websites, means that a site has to be big. Really big. Throw more money at the site, it gets even bigger. It makes profit (most of the time) but the sheer size of the likes of the booking.coms of this world means that, as a travel supplier, you have to be there or be nothing. (Note: Nothing wrong with booking.com – use it myself as a guide).

    It is at this stage that the tail starts to wag the dog. Behind this claim lies an interesting aspect – it is not price fixing at all; it is the need to “be there” and in order to be there and generate volume business, you have to cut the margins to the bone. It’s the same as another multiple product online sales window – and they take a fair whack for every product sold, not to mention laying down the law as to what price one call sell at on one’s own website. Sure, people can have a go at Skoosh but the real reason people may not want this to go any further is because there may be a lot of red hotel faces if it does.

     
  2. Dorian

    “It is a shame that the OFT allows itself to be used by a company like Skoosh.”

    And for my next trick, I’m going to convince the Royal Mint to print Skoosh on the back of new £10 notes.

     
  3. Timothy O'Neil-Dunne

    So if anyone is interested in participating in this investigation it may do so. However said person must submit their interest no later than August 28th 2012.

    http://www.oft.gov.uk/news-and-updates/press/2012/65-12

    Cheers

    Timothy

     
  4. Patrick Landman

    Patrick - Xotels

    It is a shame that the OFT allows itself to be used by a company like Skoosh.

    Skoosh, is known to hoteliers for publishing package rates intended to be coupled with airfare, car rental etc on the internet on a room only basis adding a low margin.

    Hoteliers have been fighting this practice by Skoosh, by ensuring their distributor honor their contracts on these package rates and not make them available to companies like Skoosh.

    Skoosh business model is failing and it is now using the OFT to fight against the competition.

    Again it is a shame the OFT is allowing itself to be used by a company like Skoosh.

     
 
 

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