Competition law challenge to pricing of hotel rooms by online travel agents

The UK competition authorities have formally charged a major hotel group and two online travel agents with breaking competition (antitrust) law by fixing prices at which rooms are sold online.  The case potentially has major implications for all hotel groups and online retailers of accommodation. 

On 31 July 2012, the Office of Fair Trading ("OFT") issued a Statement of Objections ("SO") alleging that three companies, Booking.com B.V. ("Booking.com"), Expedia Inc ("Expedia")  and InterContinental Hotels Group plc ("IHG"), have infringed EU and UK competition law in relation to the online supply of room only hotel accommodation by online travel agents.

The SO alleges that Booking.com and Expedia each entered into separate arrangements with IHG which restricted the online travel agents' ability to discount the price of room only hotel accommodation (i.e. hotel accommodation that is offered on a 'standalone' basis without any other travel components such as flights or car hire).

The OFT expressly noted that, although its investigation is currently focused on just three companies, the practices involved are likely to be widespread throughout the online travel agency sector. Accordingly, hotel groups and online travel agents urgently need to consider whether any of their current business practices could potentially fall foul of competition law in a similar fashion.

In company statements, IHG and Expedia noted that the practices under investigation have been generally used in the industry for many years. However, general industry acceptance is no defence to a breach of competition law, as many UK construction companies found when challenged over bid rigging of construction tenders.

The OFT's investigation was initiated in September 2010, following a complaint submitted by Skoosh, a small online travel agent, alleging that it was being prevented by various hotel chains from offering discounted sale prices for room only hotel accommodation. According to the OFT's press release on the case, it considers that the alleged infringements could limit price competition between online travel agents and increase barriers to entry and expansion for online travel agents that may seek to gain market share by offering discounts to consumers.

The issuing of an SO is a formal step in the OFT's investigation procedure and is intended to give the parties involved notice of a proposed infringement decision. The parties then have the opportunity to make written and oral representations in response to the case set out by the OFT. Such representations must be considered by the OFT before any final decision is made.

The case could well be followed by others - and by damages claims in the English courts if the OFT's findings are upheld.  Hotel groups and online travel agents therefore urgently need to review whether their own pricing practices are in line with the competition rules.