OFT Slams Booking.com, Expedia and Intercontinental Hotels Group

Jack Humphrey, Regulatory journalist
July 31, 2012 /

The Office of Fair Trading (OFT) has said Booking.com B.V. (Booking.com), Expedia Inc (Expedia) and InterContinental Hotels Group plc (IHG) have infringed competition law in relation to the online supply of room only hotel accommodation by online travel agents.

The Statement of Objections alleges that Booking.com and Expedia each entered into separate arrangements with IHG which restricted the online travel agent’s ability to discount the price of room only hotel accommodation.

Room only hotel accommodation refers to hotel accommodation that is offered on a ‘standalone’ basis without any other travel components such as flights or car hire.

The OFT considers that the alleged infringements are, by their nature, anti-competitive in that they could limit price competition between online travel agents and increase barriers to entry and expansion for online travel agents that may seek to gain market share by offering discounts to consumers.

The formal investigation was initiated in September 2010, following a complaint submitted by a small online travel agent, alleging that it was being prevented by various hotel chains from offering discounted sale prices for room only hotel accommodation.

The OFT limited the scope of its investigation to a small number of major companies, with a view to achieving a swift and effective outcome. However, the investigation is likely to have wider implications as the alleged practices are potentially widespread in the industry.

The OFT has assessed the alleged practices from January 2007 onwards. It proposes to find that the alleged infringement involving Expedia, IHG and ICL lasted from 17 October 2007 to 21 September 2010 and that the alleged infringement involving Booking.com, IHG and ICL lasted from 1 January 2007 and is ongoing.

In terms of the size of the parties under investigation, the OFT has taken into account that Expedia and Booking.com are two of the largest online travel agents in the UK, each operating on the basis of a different business model. IHG is the largest international hotel chain measured by room numbers.

UK hotel room revenue amounted to approximately £10.1 billion in 2010.

Clive Maxwell, OFT Chief Executive, said: “We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers.

“The OFT’s provisional view is that Booking.com, Expedia and InterContinental Hotels Group have infringed competition law. However, these are the OFT’s provisional findings only. All parties will now have a full opportunity to respond to our Statement of Objections before we decide whether competition law has in fact been infringed.”

The UK’s online travel agency sector is the largest in Europe. UK online travel agency gross turnover amounted to approximately £5.3billion in 2010 (according to PhoCusWright’s European Online Travel Overview, 7th Edition).

The OFT understands that this figure includes revenue generated from selling hotel accommodation as well as other travel components, including airline tickets and car hire. The transaction value of UK hotel accommodation booked through online travel agents amounted to approximately £849m in 2010 (according to the Euromonitor International report on Travel Accommodation in the United Kingdom, June 2011).

 

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