Claims of online ‘price-fixing’ hits Hotel industry

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By Bob Duncan
 
According to the Office of Fair Trading (OFT), British holidaymakers are likely to have been overcharged for hotel rooms because of a price-fixing scandal involving some of the world’s biggest online travel companies.
 
The UK Government’s consumer regulator disclosed that it is poised to take action against a number of online travel companies and major hotel chains they accuse of conspiring to fix the cost of rooms.

Hotels were effectively banned from selling rooms cheaply, with the huge global online travel agents accused of illicitly setting a minimum price to stop their prices being undercut.  Hotels refusing to use the minimum price were threatened with removal from the sites.

Expedia, one of the world’s biggest online travel firms, has admitted it “engaged in cartel conduct in breach of the law”.  It is now co-operating fully with the investigation and is understood to be providing information on its rivals under a “leniency deal”.

A spokesman for Expedia said: “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.”

The other companies involved in the alleged price-fixing face massive fines, with the OFT currently focusing its investigation on Booking.com, Intercontinental Hotels and others.

A spokesman for Intercontinental group said: “IHG considers its arrangements with the online booking agents to be compliant with competition laws and consistent with the long-standing approach of the global hotel industry. IHG is cooperating fully with the OFT’s investigation.”

The regulator announced that it believed a number of firms had breached competition law and that it had served the companies with so-called “statement of objections” notices.

Clive Maxwell, the chief executive of the OFT, said the watchdog was awaiting the firms’ responses to the notices. “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,” he said.

The investigation was started after Stoosh, a small online retailer, complained to the OFT about the tourism giants’ tactics.

The whistleblower disclosed how claimed hotels insisted that all internet suppliers marketed hotel rooms at the same price and showed how the internet travel agents insisted on this “price parity.”

An email from a senior executive at Radisson said: “Please REMOVE all Radisson Edwardian Hotel product from your site as you are causing us online rate parity issues. We offer a best online rate guarantee, as do most brands. Same room type should be same price across all online distribution.”

The OFT said it limited its investigation to a small number of major companies but was likely to have wider implications as the alleged practices were potentially widespread in the industry.

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.