Back in September 2010, the Competition and Markets Authority (CMA) opened an investigation into suspected breaches of competition laws in the recreation and leisure market sector.
Hotels were suspected of breaching competition laws by discounting restrictions in arrangements between hotels and online travel agents.
Ever since, the CMA has been keeping a very close eye on what is a lucrative and multinational industry where competition is significantly important.
Timeline of events
Between 2010 and 2015, lots of information gathering took place, including: issuing formal and informal information requests and dealing with parties’ responses; further information requests thereafter; statements of objections from the CMA; and consultation meetings proposed by Booking.com, Expedia and IHG.
During this time, the case was referred to the Competition Appeal Tribunal (CAT) who quashed the decision and sent the case back to the CMA.
Case closed
On 16th September 2015, the investigation was closed on the grounds of administrative priorities. The CMA never really elaborated on what they meant by this, but I can take a guess that it means there are other more important matters for the agency to be dealing with, or perhaps there’s insufficient evidence to take further action against companies involved.
The decision to close the investigation is not an inference to suggest that the CMA wouldn’t prioritise future suspected breaches of competition law though.
Monitoring project
Although the CMA decided to close the case, they, with the European Commission and 9 other competition agencies in the EU, monitored the industry for 12 months. Hotels across the U.K. were sent a questionnaire by the CMA to monitor how changes to room pricing terms are affected by the market.
Changes in terms
In July 2015, online travel agents Expedia and Booking.com changed their terms and conditions to remove certain ‘rate parity’ or ‘most-favoured nation’ requirements. This effectively prevented hotels from offering cheaper room rates on competing online travel agents’ websites than are offered on Expedia and Booking.com.
Results of monitoring project
The monitoring project’s results were collated and analysed in December 2016. In light of the findings, the European Competition Network (ECN) compiled a report in April 2017. From the ECN’s report, the CMA published a statement stating its decision not to prioritise further investigations.
The CMA considered that it’s too early to reach any conclusions on whether these narrow parity clauses – which allow hotels to offer lower room prices and better room availability on other online travel agents and on offline sales channels, but still allow the online travel agents to stop the hotel from publishing lower room prices on the hotel’s own website – should separately be regarded as giving rise to competition concerns and therefore may warrant an investigation by the CMA.
Ongoing review
In their statement, the CMA and EU national competition authorities noted they’ll keep an eye out in the hotel online booking sector. In the event of a slight suspicion of competition law infringement, they will reassess the situation.
Other strategies the CMA are taking to keep the sector in check include engaging with hotels to clarify and improve their understanding of the changes Expedia and Booking.com have made.