Is it price-fixing when hotels agree that all distributors must sell rooms at the same rates? Is it price-fixing when Apple, which has fewer competitors than hotels, operates similarly? This would be a game-changer if the court rules in favor of the consumer plaintiffs, and would upset the foundation of the current hotel and online travel agency business model.
Expedia Inc. and Starwood Hotels & Resorts Worldwide Inc. asked a federal judge to dismiss a lawsuit in which they are accused of conspiring with other travel websites and hotel operators to fix prices for rooms.
The plaintiffs, who bought hotel rooms across the U.S., claim in more than two dozen consolidated cases that the companies agreed to keep consumers from getting lower prices.
The companies today asked U.S. District Judge Jane Boyle in Dallas to dismiss the suit because there is no possibility their clients conspired to violate U.S. antitrust law.
“The hotels can control the price of the rooms they offer,” Thomas Barnett, an attorney for the travel sites, said in court. “As long as there is interbrand competition going on, consumers don’t have to worry.” he said, referring to competition among different hotels within a city or area.
“Prior to 2002, there was price competition” between online travel agencies, plaintiffs’ attorney Steve Berman told the judge, urging her to reject the motion to dismiss. “There is no longer any price competition.”
The plaintiffs claim that the hotels and travel companies made agreements that barred the hotels from selling rooms for less than the participating travel agents charged. That caused consumers to pay “artificially inflated prices” for hotel rooms, according to a May 1 complaint.
The plaintiffs, who are asking to turn the consolidated case into a class-action suit, are seeking unspecified damages.
“The hotel defendants could not offer to sell rooms to any other online travel agencies at a lower price than the one offered” to the agencies that were part of the maintenance agreements, the plaintiffs said in their complaint.
“The defendants’ ‘best price’ or ‘best rate’ guarantees are nothing more than a cover for their conspiracy to fix prices,” according to the complaint. “There is in reality no ‘best price,’ but instead consumers are offered a fixed uniform price.”
The defendants denied any price-fixing.
The agreements with online travel sites allowed hotels to advertise the same price for rooms across multiple outlets, Jeffrey Cashdan, representing Intercontinental Hotels Group Resources Inc., whose affiliates include Holiday Inns and InterContinental Hotels, said at today’s hearing. “To call that price-fixing is absurd.”
“There is nothing anticompetitive, much less unlawful, about a hotel setting specific pricing terms for its distributors so that it competes effectively with other hotels,” the defendants’ lawyers said July 1 in their motion to dismiss. “Plaintiffs assert the novel proposition that a hotel must compete against itself.”
The plaintiffs’ allegations don’t meet the standards for lawsuits claiming antitrust violations, the defendants said.
“Plaintiffs never allege that any hotel defendants conspired with each other to set the prices of their hotel rooms,” lawyers for the defendants said in the July 1 filing.
“Plaintiffs acknowledge — indeed they document — hotel pricing that is consistent with vigorous hotel competition,” the lawyers said.
“For example, the complaint lists nine different hotels all offering differing prices for their respective rooms in Miami. That competition between hotels — interbrand competition — is the primary focus of the antitrust laws,” they said.
The proposed class would include all people nationwide who paid for hotel rooms reserved through the defendants’ online websites from Jan. 1, 2003 to May 1, 2013, according to court filings. It wouldn’t include room reservations made as a part of a package deal or where the name of the hotel wasn’t disclosed until after paying for the reservation.
The online travel site defendants include Expedia, Hotels.com LP, Travelocity.com LP, Booking.com B.V., Priceline.com Inc., Orbitz Worldwide Inc. The hotel defendants include Starwood, Intercontinental Hotel Group, Marriott International Inc., Trump International Hotels Management LLC, and Hilton Worldwide Inc.
The lawsuits were initially filed last year and combined in a multidistrict litigation, or MDL, in February.
The case is In re On-Line Travel Company (OTC)/Hotel Booking Antitrust Litigation, 12-cv-3515-B, U.S. District Court, Northern District of Texas (Dallas).
Editors: Fred Strasser, Andrew Dunn. To contact the reporters on this story: Margaret Cronin Fisk in Detroit at or [email protected]; Tom Korosec in Dallas federal court at [email protected] To contact the editor responsible for this story: Michael Hytha at [email protected]
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Photo credit: The St. Regis, Abu Dhabi, a Starwood property. Starwood Hotels and Resorts / Starwood Hotels