A two-year investigation by the Office of Fair Trading (OFT) has led to an allegation that the world's largest hotel group, IHG, has colluded with websites Booking.com and Expedia to restrict the online travel agents’ ability to discount the price of room-only hotel accommodation, effectively limiting price competition and create barriers for other firms to expand.
The regulator's provisional findings are that these agreements infringed competition law, but Expedia and IHG have both argued that the arrangements complied with the law and that the OFT is yet to show that any laws have been broken.
"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,” said OFT chief executive Clive Maxwell. "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."
'Compliant with the law'
In response to the provisional findings, IHG said its arrangements were ‘compliant with competition laws and consistent with the long-standing approach of the global hotel industry’.
“IHG is co-operating fully with the OFT's investigation, which commenced in 2010,” the hotel giant added.
In a separate statement, Expedia said: “Expedia remains committed to ensuring that it provides consumers with the widest possible choice of travel options at competitive prices and will seek to safeguard its ability to continue to do so in relation to the current regulatory process.”
The initial investigation into the alleged price restrictions began after a complaint in 2010 by smaller online travel firm Skoosh.com, which claimed that hotels threatened it with legal action because it was discounting rooms, rather than offering prices in line with rate parity.
The OFT said it limited its investigation to a small number of major companies. However, the investigation was likely to have wider implications as the alleged practices were potentially widespread in the industry.
If the regulator concludes that there have been breaches of the Competition Act, it can impose penalties of up to 10% of a company's turnover.
The UK's online travel agency sector is the largest in Europe. The OFT said that UK hotel bookings through online travel agents totalled approximately £849m in 2010.