Australia: Online travel agents' discounts raise competition concerns for UK regulator - what about Australia?

Key Points:

Regulators globally are taking different views about the legality of online discounting, so businesses need to approach this carefully.

The UK Office of Fair Trading has recently expressed competition concerns about hotel chains restricting online travel agents offering discounts on accommodation bookings marketed on behalf of the hotels. The decision, which is not yet final, poses questions as to how such conduct might be viewed under Australian law.

What is the relationship between hotels and agents?

It is common for travel and accommodation services to be marketed online by agents, who take bookings on behalf of the provider. Usually the agents are not the contractual "suppliers" or "resellers" of the rooms – they act as agents only for the hotels. Often the consumers pay the hotels after the stay.

A conventional view is that a hotel chain principal who markets its rooms through an authorised agent in this way, and who remunerates the agent by commission, is the "supplier" to the buyer and therefore can control and set the minimum rates quoted or advertised by the online agents to consumers.

However in the recent UK decision, the Office of Fair Trading (OFT) expressed concerns about practices by hotels restricting the Online Travel Agents from funding promotions or discounts from their own margin or commission, in effect reducing the net rate quoted to consumers for the services provided.

The OFT noted most hotels also quote rates direct to consumers and therefore may be in competition with their agents.

The OFT understands these practices are widespread in the UK and expressed a view (without deciding) that the restrictions could be viewed as restrictions on discounting between competitors and therefore contrary to law.

At the same time, the OFT accepted that allowing hotels to control the minimum "headline" rates advertised for their room bookings may be of benefit to consumers – there is strong interbrand competiton between hotels, and hotels need to be able to manage their overall vacancy rates and yields to compete effectively. They would lose control of this ability to manage their business if online agents could discount without restriction or control by the hotels actually providing the rooms.

As a result the OFT opted for a compromise, suggesting voluntary commitments by hotels whereby online agents could to an extent not be restricted by hotels from offering discounts provided:

  • the discounts are offered to "closed groups" such as membership or loyalty schemes; and
  • the discounts could not exceed the agent's commission;
  • the hotels would also adjust their most favoured nation pricing clauses to allow these discounts (MFN clauses provide that hotels commit to agents to provide them with room rates no higher than the lowest rate displayed by any other online agent).

How does this compare to the Australian situation?

The OFT approach seems to go further than Australian law, which prohibits:

  • resale price maintenance, that is, conduct preventing a reseller from discounting the product or service when it is on-sold;
  • agreements or arrangements which are likely in purpose or effect, to substantially lessen or restrict competition; and
  • agreements or arrangements between parties in competition with each other which are likely in purpose or effect to fix or control prices.

The conventional view under Australian law is that the resale price maintenance laws do not apply to a properly established agency relationship since there is no "resupply" of the product by the agent.

A similar observation about agency was made in the recent Apple case in the United States concerning Apple's agency model for selling e-books on behalf of various publishers1.

So in Australia the OFT approach raises the question: if a principal prohibits an agent from reducing the price of the services offered or sharing its discount or commission with customers, does this contravene other provisions of the law, such as section 45 or the cartel provisions of the Competition and Consumer Act 2010?

Are the hotel and online agent in competition with one another?

The cartel provisions may not apply. If an agent is only an authorised agent offering the product or services, it is not the supplier and therefore would not usually be regarded as a competitor of the principal, even though the principal might itself directly market its services to the same customer base as the agent.

However the recent Australia Competition and Consumer Commission (ACCC) action against Flight Centre is challenging that view.

In the ACCC's Flight Centre case (heard by the Federal Court of Australia in October 2012; judgment reserved), the ACCC argued that Flight Centre is a competitor of the airlines and in attempting to stop certain airlines from undercutting its own prices, it was in fact trying to fix prices with competitors.

However, Flight Centre contends that the ACCC has misunderstood its business model, arguing that it acts as an agent for, rather than a competitor of, the airlines.

The judgment in this case could have significant repercussions for the way sales and distribution in the online travel industry are generally structured.

Is there a legal solution?

There are a number of risks and options to be considered when engaging in or proposing to engage in conduct involving restrictions on online discounting, particularly given the global reach of online selling and likely differing views internationally as to how these restrictions would be viewed by regulators.

Companies in the online travel booking sector seeking to implement such restrictions lawfully, or companies faced with such restrictions, need to consider their business models and agreements to find a solution which is not only lawful in Australia (if available) but which also minimises exposure to risks overseas.

For example one of the key questions is that even if a legal solution is found in the Australian context for agents offering hotel room rates, would it take into account "subagents" located overseas and any risks which may arise from seeking to place restrictions on the overseas subagents?

The balancing of the competition risks and the implementation of a workable legal solution in Australia and/or globally is not straightforward. However it is critical for companies in the online travel booking sector to get it right, given the potentially large penalties which could follow if a breach is established.


1Judge Cote of the District Court in the Southern district of New York said "The Plaintiffs do not argue, and this Court has not found, that the agency model for distribution of content, or any one of the clauses included in the Agreements, or any of the identified negotiation tactics is inherently illegal. Indeed, entirely lawful contracts may include an MFN, price caps, or pricing tiers. Lawful distribution arrangements between suppliers and distributors certainly include agency arrangements."

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.