Two of the largest online travel brands on the planet - Booking.com and Expedia - have agreed to new guidelines which will give other web-based agencies the chance to offer reductions on hotels.
It is the first update containing significant action points in the ongoing investigation by UK regulators (Office of Fair Trading) into alleged breaches of competition law around hotel bookings on the web.
The probe, which has been running for almost three years and also includes the InterContinental Hotel Group, is now being opened up for public consultation.
The OFT says today that both Expedia and Booking.com have given "formal commitments that would relax restrictions so that [rival] OTAs can provide discounts on the rate which roon-only hotel accommodation bookings are offered".
All parties have pledged, the OFT says, to two "principles" as the investigation enters its next phase:
OTAs would be free to offer reductions off headline room rates, for example by way of discounts, vouchers, rewards and/or cash back, funded by their commission revenue or margin to ‘closed groups’, for instance in the context of membership or loyalty schemes. Eligibility for such discounts would be dependent on the end-user making the booking having joined the closed group and having made a single previous booking (which is/has become non-refundable) after the effective date of the commitments of any hotel room with that OTA.OTAs would be free to publicise information regarding the availability of discounts in a clear and transparent manner, including to price comparison websites and meta-search sites (that is, to members and non-members); however, OTAs cannot publicise information regarding the specific level of discounts for any IHG hotel room to non-members (for example, the amount/percentage discount offered which would allow a discounted rate to be calculated). Similarly, other (non-IHG) hotels may prevent OTAs from publicising information regarding the specific level of discounts for a particular hotel room to non-members. If an OTA and IHG/any other hotel partner agree or have agreed to a contractual right for IHG or any other hotel partner to match a Reduction displayed to consumers who are non-members, the commitments shall not restrict the enforceability of that right.
The first inkling that the OFT would come down heavy on the subject came in July 2012 when it cited Expedia, Priceline-owned Booking.com and IHG and issued what is known as a "statement of objections".
This alleged the two OTAs entered in to individual agreements with the hotel giant which "restricted the online travel agency’s ability to discount the price of room-only accommodation".
More broadly, one of the central tenets of the investigation is that some smaller OTAs found they were unable to offer discounts on hotel rates because they had been told by property owners that pressure had been put on them (or even contracted) to hold their rates in favour of the larger OTAs.
At the time, the OFT disclosed that Expedia had applied for what is known as "Type B immunity", meaning it would get leniency for helping the OFT with its investigation.
Booking.com denied any wrongdoing and said it would fight the allegations "vigorously". IGH said it considered its arrangements with the OTAs to be "compliant with competition laws and consistent with the long-standing approach of the global hotel industry".
Fast forward 12 months and there has been some momentum around the wider rate parity issue.
Just two weeks ago, German regulators slammed hotel service HRS for "violating German and European competition law".
Officials claimed the company is using "best price clauses" in contracts, meaning hotels are obliged to always offer the lowest room price, maximum capacity and most favourable booking conditions on the web also via the HRS system.
The latest commitments put in place by Expedia and Booking.com are not an admission of previous wrongdoing, but essentially pave the way for the entire rate parity issue to be blown open not only in the UK but elsewhere around Europe.
Some believe similar issues around rate parity in the US, where a class action is currently in play, will not have the same impact.
Following the OFT update today, an Expedia official says:
"Since September 2010, the OFT has been investigating certain contractual arrangements between a single hotel chain and each of two online travel agents (OTAs) in relation to standalone room reservations made on UK websites by UK travellers.
"Expedia welcomes these commitments which will enable the OFT to close its investigation without taking any action and to permit Expedia to focus on its long-standing commitment of driving global demand for its partners by providing the best online travel experience."
An IHG official says the company has "worked closely" with the OFT to agree the commitments.
Dorian Harris, founder of Skoosh, who helped trigger the investigation after complaining to the OFT in early-2010, says:
"This looks like a major concession on behalf of Expedia and Booking.com at least. With hoteliers and OTAs able to price freely the consumers will have access to the discounted rates that have been withheld from them for years."
Booking.com's parent company Priceline says it has no specific comment to make other than what it disclosed to the US's SEC in an 8K filing earlier today.
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