Following the closure of the investigation into online travel agents’ pricing practices in the hotel online booking sector in September 2015, the Competition and Markets Authority (CMA) has since continued to monitor the industry closely.
The investigation was first launched in September 2010 where there was a suspected breach of Chapter I of the U.K. competition law (the Competition Act) in the hotel online booking sector. The investigation looked into whether there were restrictions in agreements made between InterContinental Hotels Group and Hotel InterContinental London Limited and each of Booking.com and Expedia.
It was alleged that both Booking.com and Expedia entered into agreements with InterContinental Hotels Group which had the ability of restricting online travel agents to discount price of room-only hotel accommodation.
Investigation closed in 2015
After what seemed like a ping pong game with the case going to the Competition Appeal Tribunal (CAT) and then back again to the CMA, the CMA decided to close the investigation on administrative priority grounds. The decision to close the investigation doesn’t indicate whether the parties infringed competition laws or not.
However, the CMA are not prohibited from making another investigation in the future if they suspect that price fixing is happening. This is because the competition watchdog ‘considers that agreements and concerted practices between undertakings that directly or indirectly fix prices are among the most serious infringements of competition law’.
Monitoring project
Though the investigation was closed in September 2015, the CMA has continued to monitor the industry, which includes observing the effects of recent Europe-wide changes introduced by Booking.com and Expedia. These changes meant that pricing restrictions (aka ‘rate parity’ or ‘most-favoured-nation’) were removed from their contracts with hotels. This allowed hotels to offer cheaper room-only rates on competing online travel agents’ websites.
Ann Pope, the CMA’s Senior Director reiterated monitoring the industry, said: “we will continue to watch this closely and welcome views about how the market is developing in light of these changes”. She notes that, if there are anti-competitive practices, there is a high risk of consumer harm.
The ‘monitoring project’, launched by the CMA in partnership with the European Commission and nine other competition agencies in the EU, was a strategy adopted by the CMA to collect information via questionnaires to assess how removing certain restrictions to room pricing terms – e.g. ‘rate parity’ – has affected the market. The project will specifically look at whether and how the Europe-wide removal of the ‘rate parity’ restrictions by Booking.com and Expedia in July 2015 has affected the market.
The CMA encouraged hotels that hadn’t been directly contacted to take part in the questionnaire, giving them a September 2016 deadline. The CMA notes that the joint monitoring work will be put to bed at the end of 2016. This information will be crucial for the CMA to see whether any further action is necessary in the industry.
Results from the monitoring project
In the meantime, the competition watchdog is in the middle of collating and analysing the results from their monitoring project. The results will then be published in a European Competition Network (ECN) report next year. The monitoring parties will then gather to consider the results and if necessary, discuss the next steps in the early stages of 2017.