The impact of the emergence of online travel agencies on the traditional methods of distributing hotel rooms continues to evolve. In July, the UK Office of Fair Trading issued a draft Statement of Objections alleging that booking.com, Expedia and Intercontinental Hotels Group had infringed competition law in relation to the supply of 'room only' accommodation by online travel agents. This is the latest step in an investigation instigated by complaints made by Skoosh, a small UK-based online travel agency, in 2010. The OFT's provisional findings are that there have been infringements in UK competition law. The parties have a period of time in which to respond to the OFT's provisional findings and Intercontinental, at least, is vigorously challenging the OFT's provisional findings. It has commented that:
"IHG considers its arrangements with online booking agents to be compliant with competition laws and consistent with the long standing approach of the global hotel industry".
The OFT's chief executive said in a press release accompanying the news that a provisional Statement of Objections had been issued, 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."
This indicates that the focus of the OFT's objections is price parity arrangements.
In the United States a similar battle is emerging in the form of a class action launched in August in the Northern District of California against a range of online travel agents (including Expedia, Sabre, Priceline.com and Orbitz) and hotel chains (including Marriott, Starwood, Trump and Intercontinental). This action alleges a conspiracy between the travel agents and the hotel owners to maintain minimum resale price arrangements. It appears that Skoosh is supporting the US class action.
There are similarities between the changes in the travel agency that online travel agencies bring and the changes in the book trade as a result of the distribution of ebooks by Amazon, Apple and the like.
The traditional model for distribution of hard copy books had been a wholesaler model which left the retailer free to set its own price for final sale of the book. US anti-trust authorities brought proceedings against the top three US publishing houses alleging that they had conspired with Apple to end the wholesaler model and impose an agency model whereby the publishers set the prices at which ebooks were sold and Apple was guaranteed a 30 percent commission on each ebook sold. The US anti-trust proceedings have been settled in the last few weeks on the basis that the major publishing houses compensate ebook buyers for the losses they have suffered as a result of the move to an agency model. In Europe the European Commission is concerned that a similar switch by the publishers to the agency model may have breached EU anti-trust rules that prohibit cartels and restrictive practices.
Hotel owners who want to move to an agency model for the sale of hotel rooms via online channels will be focussed on the extent to which, if at all, Intercontinental succeed in persuading the OFT that there has been no infringement of UK competition laws. They will also be interested in developing arguments as to how the sale of hotel rooms via the Internet can be distinguished from the sale of ebooks.