Agreements on room discounts may have been anti-competitive, says OFT

Out-Law News | 31 Jul 2012 | 5:04 pm | 1 min. read

The biggest hotel chain in the world and two online travel agents may have breached UK competition law by entering into agreements that limited the ability of those agents to discount the price of room-only offers, a UK regulator has said.

The Office of Fair Trading (OFT) said it had issued a 'statement of objections' to InterContinental Hotels Group plc (IHG) and online agents and Expedia to allege that the companies acted in breach of the UK's Competition Act.

The regulator has said that the two agents had separate agreements with IHG that placed restrictions on the price discounts they could offer consumers when selling "room only hotel accommodation", which excludes other travel components such as flights and car hire. It added that's alleged infringement is "ongoing" and has been taking place since the beginning of 2007. Expedia's alleged infringement took place between 17 October 2007 and 21 September 2010, the OFT said.

"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," according to a  statement issued by the regulator.

The Competition Act prohibits the forming of agreements and "concerted practices" where the object or effect of them is "the prevention, restriction or distortion of competition" in the UK and which may affect trade in the UK or a part of it.

The OFT launched a formal investigation into "a small number of major companies" in the hotel sector after receiving a complaint from a small online travel agent which had claimed that it had been "prevented by various hotel chains from offering discounted sale prices for room only hotel accommodation." It said that its investigation findings are "likely to have wider implications" because other companies may also currently be engaging in similar anti-competitive behaviour as is alleged of, Expedia and IHG.

'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," Clive Maxwell, OFT chief executive, said in a statement. "The OFT's provisional view is that, 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."