OFT Investigates Hotel Price Fixing

The Office of Fair Trading (OFT) has been investigating the biggest hotel chain in the world and two leading online travel companies for two years on accusations of hotel price fixing at the expense of British holidaymakers. The regulator has warned that the deals could be widespread in the travel industry, which could mean further probes into other travel firms.

Through its investigation, the OFT has provisionally found that InterContinental Hotels Group (IHG) – the owner of Holiday Inn – conspired with Expedia and Booking.com to limit discounts to guests. The investigation was triggered in September 2010 after a small online travel agent complained that it was being prevented from offering discounts for room-only accommodations by large hotel chains.

The operator of Stoosh, Dorian Harris, said he issued the complaint after becoming concerned about the manipulation of the market. Consumers are seeing best price guarantees on nearly every travel website now. What they don’t see is that these companies are only able to guarantee the best rates with confidence because they have restrained the competition from discounting rates using legal threats.

Publishing its interim findings this week, the OFT says Expedia and Booking.com entered into separate deals with IHG that appear to have breached the 1998 Competition Act. Expedia is alleged to have violated rules over the course of three years – between October 2007 and September 2010 – while the deal between IHG and Booking.com is ongoing. The regulator says the alleged infringements may limit price competition between online travel agents and make it tougher for new online travel agents to get business by offering cheaper deals.

OFT chief executive Clive Maxwell says they want consumers to fully benefit from being able to shop around online for a better deal from discount websites that are ready to share their commission. However, these are only their provisional findings, and all parties will get the chance to formally respond to their statement before they decide if competition law has been infringed, he added.

The companies being investigated are among the biggest players in the £10 billion a year hotel industry in Britain. IHG is a publicly-quoted group based in Buckinghamshire and is the biggest hotel operator in the world with 660,000 rooms. It owns 4,500 hotels across almost 100 countries, and its nine brands include some of the best known in the business – Holiday Inn, InterContinental and Crowne Plaza. Booking.com is owned by US company Priceline.com, claiming to be the best online hotel reservation service in the world with over 210,000 hotels in its network, which can be booked in 41 languages.

IHG and Booking.com have insisted that they haven’t done anything wrong and suggest they will challenge the findings. IHG says its arrangements with online travel agents comply with competition laws and are consistent with the long-standing approach of the worldwide hotel industry. Priceline.com also said it will vigorously contest the allegations. Expedia says it’s still committed to making sure it provides consumers with the biggest range of travel choices possible and will seek to protect its ability to continue doing so in relation to the current regulatory process.

Blink Booking managing director Mark Datta says he’s not surprised with the findings, as they have believed for a while that big online travel agents have been guilty of keeping the best prices from consumers. They have also believed that hotels are tied by price parity deals. The online travel market may look like it offers plenty of competition and choice, but it’s really just a lot of different shops selling the same room for the same prices. Those prices are agreed on through parity deals between big companies, he added.