The OFT is consulting on proposals put forward by two online travel agents (OTAs) and InterContinental Hotels Group plc (IHG), which are designed to address its competition concerns in relation to the online offering of room-only hotel accommodation bookings by OTAs. The case demonstrates that agency agreements in the UK and the rest of the EU, including those that operate only for online sales, need to be established correctly in order to comply with competition law.

The OFT’s allegation in this case is that the two OTAs and IHG were parties to an agreement under which the OTAs agreed to offer hotel accommodation at a particular IHG hotel at the day-to-day room rate set by the hotel and not to offer rooms at a lower rate, for instance by funding a promotion or discount from their own margin or commission. The proposals put forward in the consultation, which was announced on 9 August 2013, would allow OTAs to provide discounts on the rate at which room-only hotel accommodation bookings are offered at IHG hotels (for example by using their commission revenue or margin).

The case follows, in the online world, established principles on the competition law treatment of the principal/agent relationship. Where a “true agent” for the purposes of competition law is being used, the principal is free to set the prices and conditions at which the agent must sell or purchase the goods or services that it is handling for the principal. However, where an agent is not a “true agent”, then any obligation preventing or restricting the agent from sharing its commission with the ultimate customer will generally give rise to an infringement of competition law and potentially a fine. The agent in this situation must be free to lower the effective price paid by the customer.