Online hotel deals broke law, says OFT
Published: 31st Jul 2012 10:39:24
Two online travel agents and a hotel group could be limiting price competition on hotel room sales, early results of an investigation have found.
Booking.com and Expedia entered into separate agreements with Intercontinental Hotels Group (IHG), the Office of Fair Trading said.
The regulator's provisional findings are that these agreements infringed competition law.
Expedia and IHG argued that the arrangements complied with the law.
Expedia claimed that the OFT had yet to show that any laws had been broken.
"Expedia remains committed to ensuring that it provides consumers with the widest possible choice of travel options at competitive prices and will seek to safeguard its ability to continue to do so in relation to the current regulatory process," it said in a statement.
IHG said its arrangements with online booking agents were "compliant with competition laws and consistent with the long-standing approach of the global hotel industry".
The three firms can now respond to the allegations within three months.
Hotels sell some rooms directly to customers, but use online agents to keep their occupancy levels high.
The UK's online travel agency sector is the largest in Europe. The OFT said that UK hotel bookings through online travel agents totalled approximately £849m in 2010.
We want people to benefit fully from being able to shop around online”
The sale of hotel rooms over the internet has become a huge business, dominated by the hotels themselves and by global websites which sell the rooms on commission.
An OFT investigation began in September 2010, after a discount website called Skoosh.com complained that it was being put under pressure to maintain a standard price rather than share its commission with customers.
The provisional findings of the OFT's investigation is that the agreements between Booking.com and Expedia with IHG could limit price competition and create barriers for other firms to expand.
The arrangement between Booking.com and IHG was still in place, while Expedia allegedly violated rules between October 2007 and September 2010, the OFT added.
"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," said Clive Maxwell, OFT chief executive.
"The OFT's provisional view is that Booking.com, Expedia and InterContinental Hotels Group have infringed competition law. However, these are the OFT's provisional findings only. All parties will now have a full opportunity to respond."
Within the travel business the practice of keeping prices at a pre-set level is talked about openly and is called "rate parity".
The effect is that a customer might look at several websites and see the same prices advertised.
And where there is very little variation in prices, a website can claim, truthfully, that its prices are the "cheapest".
The OFT said it limited its investigation to a small number of major companies. However, the investigation was likely to have wider implications as the alleged practices were potentially widespread in the industry, it added.
If the regulator concludes that there have been breaches of the Competition Act, it can impose penalties of up to 10% of a company's turnover.
Harvard CitationBBC News, 2012. Online hotel deals broke law, says OFT. [Online] (Updated 31 Jul 2012)
Available at: http://www.ukwirednews.com/news.php/1443654-Online-hotel-deals-broke-law-says-OFT [Accessed 23rd May 2013]
At 15:49:48 in EnglandTwo men have been jailed for life for the murder of the stepson of gangland celebrity and author Dave Courtney....
At 15:49:44 in WorldA Russian drifting Arctic research station is to be evacuated because the ice field around it is melting, the environment ministry in Moscow...
At 15:45:17 in EnglandA pirate ship made from driftwood gathered from a Merseyside beach has been badly damaged in a suspected arson attack....
At 15:43:07 in EntertainmentRobert Redford has received a standing ovation for his performance in All Is Lost at the film's Cannes premiere. ...
At 15:42:09 in EnglandA school criticised for its handling of a pupil's claim that she was raped by students could face closure after a report found children...
At 15:35:38 in WalesA man accused of murdering five-year-old April Jones in a sexually motivated attack has denied being a paedophile....
At 15:31:26 in EnglandA family doctor who used a secret camera inside his wristwatch to record himself abusing female patients at his surgery has been jailed for ...
At 15:27:04 in EnglandResidents in the garrison town of Aldershot have spoken of their fears after the killing of a serving soldier in Woolwich....
At 15:08:07 in EnglandThe body of a man has been recovered by police divers from Bristol's harbourside....
At 15:07:06 in ScotlandThe broken-down ferry which was taken off the Orkney to Scrabster route has resumed service....
News In Other Categories
Robert Redford has received a standing ovation for his performance in All Is Lost at the film's Cannes premiere. ...
Tuition fees in England could be limited to £6,000 per year and remain cost-neutral to universities and the Treasury, a study commissioned b...
The broken-down ferry which was taken off the Orkney to Scrabster route has resumed service....
A man accused of murdering five-year-old April Jones in a sexually motivated attack has denied being a paedophile....
A former college football player has scored a court victory against Electronic Arts....
Two men have been jailed for life for the murder of the stepson of gangland celebrity and author Dave Courtney....