The provisional decision in the UK about hotels' and OTAs' pricing practices is a shot heard round the world. If other countries pile on, the dollars at stake would be huge.
While InterContinental Hotels Group and Expedia have been fairly laid back in their public responses to the UK Office of Fair Trading’s provisional finding that they engaged in anticompetitive practices regarding hotel rate parity issues, Priceline’s Booking.com has come out swinging.
After all, Booking.com notes that if an OFT decision, which isn’t expected before 2013, goes against the company, it could be subject to up to $50 million in fines.
“The Company disputes the allegations in the SO (Statement of Objections from the OFT) and intends to contest them vigorously,” Booking.com stated in a Securities and Exchange Commission filing. “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; it does not take possession of or title to hotel rooms and is 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.”
Unlike Expedia, for example, Booking.com is stating that it doesn’t participate in the merchant model, where rate parity issues between hotel websites and online travel issues come to the fore.
If the OFT concludes that Booking.com engaged in anticompetitive practices, it will have the option of challenging such a decision in the UK courts, the company says.
A fine of up to $50 million “could adversely impact the Company’s cash flow and results of operations in a given operating period,” Booking.com says. “In addition, the OFT may require changes to Booking.com’s business practices, including changes to its approach to pricing and the use of ‘Most Favored Nation’ clauses in contracts with hotels.”
Any adverse OFT decision would be the tip of the iceberg for Booking.com, Expedia and InterContinental — and untold other numbers of lodging and OTAs which may engage in similar practices.
As Booking.com states: “… The Company is also unable to predict at this time the extent to which other regulatory authorities may pursue similar claims against the Company.”
Hotel sales are the most lucrative component of most OTAs’ businesses and the proceedings in the UK hit at their very core.
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