Digital Booking Sites

Court: Priceline doesn’t need to disclose profits on hotel bids

Mar 28, 2013 5:19 am

Skift Take

It is very interesting that the court drew a distinction between Priceline and travel agencies. The court held that Priceline doesn’t have a fiduciary relationship with its Name Your Own Price customers as a travel agency would, but merely has a contractual relationship.

— Dennis Schaal

Free Report: The State of Student Travel

Priceline.com does not have a fiduciary duty to tell customers that it often pockets a profit from bookings through its “Name Your Own Price” service, a New York federal appeals court ruled Wednesday.

Plaintiffs Lee Johnson and Joey Marie Kelly accused Priceline of breaching contract and fiduciary duties to customers by not telling them that their bid for a hotel room generally exceeds the amount that Priceline compensates the hotel vendor.

In its ruling on Wednesday, the 2nd U.S. Circuit Court of Appeals said Priceline’s actions are merely akin to a “middleman rifling through its inventory of discounted hotel rooms until it locates an item for which the customer has stated a willingness to pay a specified price.”

Priceline is contractually obligated to provide the desired accommodations at the stated sum, wrote Circuit Judge Reena Raggi in a unanimous three-judge panel opinion. But once the bid has been submitted, the customer retains no authority over how the reservation is procured, Raggi wrote. “Thus, neither the bid nor its acceptance gives rise to a fiduciary duty of disclosure.”

Johnson and Kelly, both residents of Illinois, used the service to book reservations at the Omni Hotel in Richmond, Virginia, and the Sheraton Hotel in Boston, respectively. Priceline represented itself “as a travel agent with the client’s best interests in mind,” they said in a proposed class- action lawsuit in federal court in Connecticut in 2011.

“In one notable commercial (actor William) Shatner, on behalf of a customer, uses his seductive powers to convince a hotel reservationist to lower the room price on a four-star hotel room in Chicago from $200 to $99,” they said in an amended complaint.

Judge Raggi dispensed with that argument.

“Nothing in the advertisements implies that customers retain control over this negotiation process,” Raggi wrote.

They sought compensatory and punitive damages, among other relief from Priceline, which is based in Norwalk, Connecticut.

The appeals court decision affirms a decision last year by Janet Bond Arterton, a U.S. District judge with the District of Connecticut. Arterton dismissed the lawsuit in part because the “allegations demonstrate nothing more than a transaction in which Priceline sold to them what they asked for, and what was advertised.”

An Attorney for Johnson and Kelly was not immediately available to comment.

The case is Lee E. Johnson, Joey Marie Kelly v. Priceline.com Inc, 2nd U.S. Circuit Court of Appeals, No. 12-1744.

The full ruling is embedded below:

Download (PDF, 206KB)

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