NB: This is a viewpoint from Dorian Harris, founder of hotel booking site Skoosh.
A UK competition regulator, The Office of Fair Trading (OFT), is being kept busy in the travel space right now.
One division is acting on my own complaint that online travel agencies are conspiring to preclude price competition through the enforcement of uniform pricing or "rate parity", and another is looking into the $1.8 billion acquisition of US price comparison site Kayak by the hotel industry giant, Priceline.
I have written to object to that, too.
The notion of a major OTA owning a price comparison site is not, in itself, a concern. It happens in other industries - GoCompare and Confused.com, two of the leading price UK comparison sites for insurance, are owned by the insurance companies, Esure and Admiral respectively.
Travel angle
Though this gives these insurers real time access to their competitors prices, the expectation would be that they’ll use this information to compete and undercut. With Priceline’s access to its competitors prices on Kayak, I have no such expectation.
Used negatively, the ownership of technology can pose a major threat to the public. In 2010 Kayak became a leading proponent of FairSearch, an organisation set up to challengeGoogle’s acquisition of ITA Software, the system which underpins many flight search providers.
Its charge is this:
When search providers engage in search discrimination – manipulating search results to promote a favored product and demote competitors – consumers pay the price.
It’s a reasonable concern and it could happen but I’m not overly troubled because Google’s modus operandi has always been to display the best search results. If it fails in that it opens the doors to competition.
Priceline’s proposed acquisition of Kayak, on the other hand, poses a very real threat because both companies are already using technology to, in my view, manipulate search results and therefore both fall a long way short of transparent.
Kayak merely gives the illusion that it offers visitors a cross-section of competitors. As a starting point, take the fact that two companies are auto-checked in the initial hotel search on Kayak.
They are Expedia and Hotels.com and beside them a note says: "Choose Sites to Compare".
But the sites are already chosen and there’s nothing to compare. It is unlikely that many of the travelling public would know that Expedia and Hotels.com are one and the same company. Nor that, as adherents to rate parity, they also have the same selling prices.
Beyond that there is precious little competition in the hotel space on Kayak. For any search, typically around ten companies populate the results. Among them you'll find Expedia, Hotels.com and Venere. The same company and the same prices.
And, leading the list each time, Kayak, almost acting as an OTA in its own right. Despite Kayak's stated concerns that Google might engage in "search discrimination" should it acquire ITA, Kayak always lists itself first, irrespective of whether it has the best deal. And Kayak's prices themselves are often fed by none other than Expedia.
It gets worse. Whenever a hotel appearing in Kayak’s search results is part of a chain, some OTAs and the hotel will have agreed non-compete or "rate parity" clauses so the hotel has the same price as the agencies.
Again, I expect few consumers are aware of any of this. Nor whether they're aware that there is significantly more choice available if they jumped across to Kayak's competitors outside the US, Hotelscombined or Trivago, for example, where the range of competitors is more than double and the range of offers is far wider.
Expedia, it is worth saying, has just completed a $632 million investment in Trivago.
Concerns
For all that, it was not Kayak's apparent lack of transparency at the root of my complaint. Rather it was that online travel agencies already use Kayak and other price comparison sites to police rate disparities.
Where they see parity rates not being upheld, they cut and paste the offending supplier and rate details into emails and send them to hotels demanding their removal from Kayak. If the hotels don't act or they don't act fast enough they are threatened with poor placements on the OTAs or, worse, a de-listing.
If Priceline was buy Kayak, my concern is that Priceline's worldwide cottage industry of rate parity monitors would evolve into a largely automated process, price disparities picked up and dealt with in real time.
The threats made against small OTAs, such as my own, Skoosh, already a daily occurrence, would shoot up to an unprecedented level.
There was a time that sections of the industry would turn on me and say Skoosh should be observing rate parity anyway. The OFT so far disagrees. As do the Swiss and German competition authorities.
And the 31 States in the US in which class actions have been brought against online travel agencies (using our evidence). And now Norway, where every major hotel chain has terminated contracts with a leading OTA for its insistence on rate parity.
Maybe the ITA flight technology is too important to be in the hands of one major company. Maybe there are opportunities for abuse. Kayak is right to at least forward its concerns to the competition authorities.
But Priceline's influence in the hotel space is no mere speculation, it is very much happening, and the thought of it acquiring Kayak, the only significant price comparison site in the US, with eyes of a major overseas expansion, is a step too far.
I, for one, will not watch it slip through unchallenged.
NB: This is a viewpoint from Dorian Harris, founder of hotel booking site Skoosh.
NB2: Detective image via Shutterstock.