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On 31 July 2012 the OFT issued a Statement
of Objections (SO) alleging that Booking.com B.V.
(Booking.com), Expedia Inc (Expedia), InterContinental Hotels Group
plc (IHG) and Hotel Inter-Continental London Limited (ICL) have
contravened competition law.
The investigation was launched in September 2010, following a
complaint by skoosh.com that it was being prevented from selling at
below the "rate parity" room rate. Please see the
analysis
of the initial complaint in our CMS journal "Hospitality
Matters".
The OFT has looked at activity since January 2007. It
considers that separate arrangements by each of Expedia and
Booking.com with IHG restrict the agent's ability to offer
discounted hotel rooms. The OFT proposes to find that the
breach of the competition rules by Expedia, IHG and ICL lasted from
October 2007 to September 2010 and that the infringement involving
Booking.com, IHG and ICL lasted from January 2007 and is
ongoing.
The OFT's concern is that the arrangements could limit price
competition between online travel agents and make it more difficult
for online travel agents to start up and develop discount
offerings. OFT Chief Executive Clive Maxwell said that the
OFT "wants 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".
Potential involvement of other hotel groups and booking
operators
The OFT wanted to be able to move swiftly and decisively, so
chose to limit the investigation to a small number of major
companies. Expedia and Booking.com are two of the largest
online travel agents in the UK. They operate different
business models. IHG is the largest international hotel chain
measured by room numbers.
The OFT's press release makes clear, however, that "the
investigation is likely to have wider implications as the alleged
practices are potentially widespread in the industry".
Hotel groups and online booking agents alike will want to take note
of this warning and consider their positions.
The industry is big business in the UK, with UK hotel room revenue
amounting to approximately £10.1 billion in 2010. The
OFT notes that the UK's online travel agency sector is the
largest in Europe and that the transaction value of UK hotel
accommodation booked through online travel agents amounted to
approximately £849m in 2010 (see notes to OFT press
release). This investigation concentrated on hotel
accommodation that is offered on a "standalone" basis,
not combined with flights or car hire or other travel
components.
What next?
The announcement is a provisional view, but it clearly points
the direction in which the OFT is moving. An SO is formal
notice to those under investigation of the OFT's proposed
infringement decision under the Competition Act 1998.
Booking.com, Expedia and IHG will have an opportunity to respond to
the OFT's statement and the OFT will consider all those
representations before issuing a final decision.
An SO is confidential and will not be published. However,
any company which wishes to comment on the OFT's provisional
findings, and which is in a position materially to assist the OFT
in testing its factual, legal or economic arguments, may request a
non-confidential version of the SO by contacting the OFT no later
than 28 August 2012. Details are
available on the OFT's web pages dedicated to the
investigation.
This article was written for Law-Now, CMS Cameron
McKenna's free online information service. To register for
Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance
only. The information and opinions expressed in all Law-Now
articles are not necessarily comprehensive and do not purport to
give professional or legal advice. All Law-Now information relates
to circumstances prevailing at the date of its original publication
and may not have been updated to reflect subsequent
developments.
The original publication date for this article was
01/08/2012.
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