Expedia Inc. and Priceline settled a lawsuit over Priceline's advertising practices.
The terms of the settlement were not disclosed.
The Expedia Inc. and hotels.com lawsuit, filed in May 2009 in a federal court in Washington state, alleged defendant Priceline engaged in "an egregiously misleading advertising campaign" when it claimed in its Negotiator TV and website advertisements that consumers could get discounts of "half off" or "up to half off" on Priceline compared with Expedia and hotels.com.
The plaintiffs alleged that Priceline misled consumers by comparing winning bids on Priceline's Name Your Own Price bidding service with "fundamentally different" published rates on Expedia.com and hotels.com.
"Priceline's marketing tactics amount to nothing less than a classic bait and switch," the lawsuit alleged. "Priceline lures consumers to its website through the promise of substantial savings yet, once at the website, the consumer has no indication that those savings are only available through a 'blind bidding' service."
Priceline TV and website ads featuring the Negotiator, played by William Shatner, were singled out by Expedia and hotels.com in the lawsuit, which stated:
"Expedia only very recently learned that Priceline is also airing another television commercial which features the 'Negotiator' character and a vacationing couple in the back of a van (herein referred to as the 'Travel Napping' commercial).
"Approximately half-way through the Travel Napping commercial, the Negotiator character says: 'At Priceline, you can name your own price and save half off on hotels.' Another actor in the commercial then looks at a computer screen and states: 'That's way less than Expedia.'"
Here's the TravelNapping video on YouTube:
This current version of the video, however, makes no reference to Expedia or hotels.com, but says: "That's way less than the price we found."
The lawsuit also cited a Negotiator image above a "Search now" button on the Priceline homepage. The Negotiator image linked consumers to "recent winning bids" comparing "a 4-star hotel room in Chicago for $85 from Priceline and $199 on the Expedia.com website..." the suit stated.
Although a Priceline disclaimer at the bottom of a price-comparison chart on the page explained that with Priceline's Name Your Own Price service "the exact hotel is shown only after purchase and sales are final," the Expedia-hotels.com suit alleged, "Nowhere, even in the disclosure, was the 'blind-bidding' feature disclosed."
The suit alleged that Priceline has a "history of false and misleading advertising claims" and that the National Advertising Division of the Council of Better Business Bureaus in 2003 and 2008 "concluded that Priceline had failed to adequately disclose to consumers the material differences between its 'bliind-bidding' service and the fixed-price services of other competitors."
Prior to the settlement, Expedia and hotels.com sought corrective action by Priceline, all profits from Priceline's allegedly "wrongful acts," and damages.
In July 2009, Priceline filed a motion to stay the suit, alleging that Expedia and hotels.com filed the lawsuit to head off an NAD investigation into the same issues "rather than suffer an imminent loss at NAD."
Priceline also sought to dismiss Expedia's and hotels.com's false advertising claims, alleging that the statute under question "does not allow a party to prevent its competitor from conveying truthful information about the benefits of its goods and services, and it imposes no obligation of affirmative disclosure."
Priceline pointed to one Negotiator TV ad, the "Tough Love" commercial, in which the announcer states: "At Priceline find half-price hotels everyday. Save up to half off on Expedia's best price and hotels.com's best price."
Priceline pointed to a message, which it said "prominently appears" at the bottom of the screen.
The message states: "Priceline's Name Your Own Price service is different from Expedia and Hotels.com. Exact hotel shown only after purchase."
Here's the Tough Love video on YouTube:
Priceline alleges that "Expedia essentially concedes that Name Your Own Price customers do in fact save money over the published hotel rates on Expedia.com and hotels.com" and that the plaintiffs' actions amount to "an outright ban on truthful -- and constitutionally protected -- speech."
Priceline sought to dismiss Expedia Inc.'s and hotels.com's claims.
The parties settled the dispute on Sept. 2, 2010, and the terms were not disclosed.
Priceline declined to comment on the issue and an Expedia spokeswoman says the lawsuit "was settled amicably."
A quick look at Priceline.com website advertising today, which offers the chance to "save up to 50% on Hotels," found no references to Expedia or hotels.com, but referred to comparisons to "other leading online travel sites."
The fine print about hotel savings states: "Over the last 12 months, a substantial percentage of accepted offers have resulted in savings of up to 50% in comparison to the lowest published rates on other leading online travel sites for the same itinerary.... Priceline's Name Your Own Price reservation system is different from other online travel sites. With Priceline's Name Your Own Price reservation system, the exact hotel is shown only after purchase."