Small travel agencies have long complained that pricing agreements between large hotel chains and the OTAs limit how they can price rooms, and it looks like someone is finally listening.
The Office of Fair Trading has accused Expedia, Booking.com and InterContinental Hotels Group – operator of the Holiday Inn and Crowne Plaza brands – of infringing competition law by signing deals that limit the discounts offered to consumers on rooms.
The OFT began an investigation into a handful of major hotel and booking firms in September 2010 following a complaint from a small online travel agent.
Its preliminary findings, presented to Expedia, Booking.com and IHG in a statement of objections, allege that the three firms entered into arrangements that violated competition rules between October 2007 and September 2010 by restricting other travel agents’ ability to discount the price of room-only hotel accommodation.
When hotels sell directly to consumers they are free to set out their own retail prices. But the OFT alleges that, even when selling through the likes of Expedia and Booking.com, some hotels have been dictating the prices those agents should charge. It said the alleged infringements were anti-competitive because they limited price competition between online travel agents, and make it harder for smaller agents to compete.
Clive Maxwell, OFT chief executive, said: “We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers.
“The OFT’s provisional view is that Booking.com, Expedia and IHG have infringed competition law. However, these are the OFT’s provisional findings only. All parties will now have a full opportunity to respond to our statement of objections before we decide whether competition law has in fact been infringed.”
The OFT warned that while it only investigated “a small number of major companies, with a view to achieving a swift and effective outcome”, its investigation is likely to have wider implications as the alleged practices are potentially widespread in the industry. UK hotel room revenue was worth just over £10bn in 2010.
In a statement Expedia said: “The statement of objections does not establish that any laws have in fact been broken. Expedia will now review the statement and provide its response to the OFT in due course. For obvious reasons, Expedia is unable to comment further at this stage.”
Mark Datta, managing director of travel agent Blink Booking, said: “We’ve long believed the big online travel agents have been guilty of denying consumers the best prices, and that hotels’ hands are tied by price parity agreements.
“The online travel market may appear to offer plenty of choice and competition, but the reality is that there are lots of different shop windows selling the same rooms at the same prices – with those prices agreed through parity deals between the big groups and the big online travel agencies.”
“Smaller internet travel agents have long wanted to offer lower prices to customers by sacrificing some of the margin on the prices we buy rooms at from the hotel groups. However, there is pressure to maintain pricing to protect the interests of a few big travel groups, at the expense of the traveller.”
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