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.