If you don't think Expedia and other online travel agencies are worried about this one, guess again. Laws in Europe and the U.S. over rate parity issues vary, but adverse rulings could really shake things up.
Expedia Inc. says 21 putative class-action lawsuits have been filed in the U.S. against itself, other online travel agencies, and major hotel chains over competition issues as they relate to hotel pricing.
These lawsuits are playing out in state and federal courts across the country, Expedia states.
All of the suits, Expedia says, reference the fact that the UK’s Office of Fair Trading preliminarily found that Expedia, Booking.com, and InterContinental Hotels Group entered into contracts that stifled competition because rate parity provisions mandated that the hotels couldn’t enter into discounted pricing arrangements with particular distributors.
A spokesperson for the Office of Fair Trading points Skift to a timetable in the ongoing investigation that would have had oral hearings wrapped up last month, and a final decision slated for December 2013.
In its recent 10-K filing with the Securities and Exchange Commission, Expedia notes that the OFT investigation could have wider implications for the UK travel industry beyond the three-named companies, and that regulatory authorities in other European countries have launched their own investigations.
Outside the UK, Switzerland is one of the European countries that has fired-up its own investigation of the OTA-hotel contracts.
Parity and competition
Rate parity clauses generally mandate that online travel agencies must get the same rates that hotels offer on their own websites. In addition, Hilton wouldn’t be able to give a lower hotel rate to Travelocity than it gives Expedia, for example.
Often, when travel companies cite litigation against them, they argue that the lawsuit has little or no merit, and they expect to prevail.
These lawsuits and national-competition investigations could be game-changers, however.
Expedia states, somewhat ominously:
“We are unable at this time to predict the outcome of the OFT’s investigation and the impact, if any, on our business and results of operations.”
Between these lawsuits and investigations, and the potential $170 million excise tax bill that Expedia may owe to the State of Hawaii, rest assured that Expedia’s lawyers are keeping very busy.