The Competition and Markets Authority (CMA) has issued warnings to a number of unnamed sites due to their use of pressure selling and hidden charges.
Its concerns include sites ranking properties based on the amount of commission paid by a hotel, rather than those most relevant to the customer.
The watchdog is also examining whether sites are giving consumers a false impression of room availability to rush them in to making a booking.
The sites will be required to take action where they are believed to be breaking consumer protection law. The CMA can either secure legally binding commitments from those involved to change their business practices or take them to court.
Andrea Coscelli, Chief Executive of the CMA, says: “Holidaymakers must feel sure they’re getting the deal they expected, whether that’s securing the discount promised or receiving reliable information about availability of rooms. It’s also important that no one feels pressured by misleading statements into making a booking.
“That’s why we’re now demanding that sites think again about how they’re presenting information to their customers and make sure they’re complying with the law. Our next step is to take any necessary action – including through the courts if needed – to ensure people get a fair deal.”
The news was welcomed by hospitality trade bodies, which have previously criticised the tactics used by online travel agents (OTAs).
“The fees that OTAs charge hoteliers and B&Bs inevitably result in higher costs to the consumer - a premium of which many holidaymakers are not even aware,” says UKHospitality chief executive Kate Nicholls.
“Consumers and accommodation providers would be better served by a wider review of the business to platform relationship, which is now overdue.
“The practices addressed here exposes yet another example of digital businesses stealing an unfair lead on honest, regulated operators whose first concern is to deliver good service to their customers.”
The CMA has sent warning letters to a range of websites demanding they review their terms and practices to comply with the law.
It is also referring concerns over OTAs' use of phrases such as “best price guarantee” to the Advertising Standards Authority (ASA), to consider whether it they are misleading for customers.
The watchdog says it is continuing to assess evidence and could launch further enforcement action in due course.