You can expect that the online travel agencies eventually will have to alter their hotel rate parity practices -- in Europe, at least.
Switzerland’s Competition Commission announced December 11 that it launched an investigation into the practices of the three online travel agencies, all of which sell hotel rooms in Switzerland.
Amsterdam-based Booking.com, which is a subsidiary of Priceline, is the largest online hotel booker in the world. Expedia Inc., including Expedia.com, Hotels.com and Venere, ranks second. HRS is a Germany-based OTA.
Switzerland’s Competition Commission stated it suspects that the OTAs best-rate guarantees — Bestpreisgarantien — with hotels, and additional contract terms pertaining to room availability “could constitute illegal restraints.”
Under these rate parity rules, the OTAs require hotels to give them their lowest rates, and they are barred from offering discounted rates elsewhere, including on the hotels’ own websites.
These practices could restrict competition and illegally inhibit new competitors from entering the market, the Swiss government agency stated.
In addition to probes of such practices in the UK and Switzerland, major OTAs and hotels face a consumer lawsuit in the U.S. charging them with price-fixing.
In the UK, at least, Booking.com vigorously opposes the Office of Fair Trading’s allegations that Booking.com restricts competition with rate parity practices.
Booking.com stated in August:
The Company disputes the allegations in the SO (Statement of Objections from the OFT) and intends to contest them vigorously. 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.
Update: Anoeska van Leeuwen, a spokesperson for Booking.com, states: “We have seen the press release of the Swiss authority and intend to fully cooperate with the investigation. We have no further comment at this moment in time.”
A translation of the Switzerland Competition Commission’s announcement follows:
Competition Commission opens investigation against hotel booking platforms
Bern, 12.12.2012 – On 11 December 2012, the Competition Commission (Comco) has opened an investigation into the online booking platforms Booking.com, Expedia and HRS. It is suspected that required over hotels Bestpreisgarantien and further terms could constitute illegal restraints.
There are indications that certain clauses in the contracts between Booking.com, Expedia and HRS and their respective affiliated partner hotels may restrict competition between these online booking sites. This concerns in particular the so-called Bestpreisgarantien which restrict the ability of hotels to set up various distribution channels of different retail prices, as well as contractual clauses concerning room availability through different distribution channels. There is also the suspicion that abuse Booking.com, Expedia and HRS at most a dominant position by introducing such clauses to the hotels and enforce. Such clauses could also hinder competitors entering the market in the pursuit of competition. As part of the investigation will determine whether there is actually illegal restraints.
Address for inquiries:
Dr. Rafael Corazza
031 322 20 41
079 652 49 57
@ rafael.corazza weko.admin.ch Dr. Olivier Schaller 031 322 21 23 079 703 80 07 @ olivier.schaller weko.admin.ch
Photo credit: Booking.com's Germany site displays a Geneva hotel Booking.com