UK Court quashes decision accepting the commitments by OTAs and hotel chain in the online booking sector
By Gabriele Accardo
Last 26 September, following an appeal by meta-search site Skyscanner, the UK Competition Appeal Tribunal (“CAT”) quashed the decision of the Office of Fair Trading (the “OFT”) to accept commitments to remove certain discounting restrictions for online travel agents (“OTA”) following the OFT investigation into the online supply of room-only hotel accommodation by OTAs.
As it may be recalled, last January 2014 the OFT accepted commitments from online travel agents, Booking.com B.V. (“Booking.com”, and its ultimate parent company Priceline.com Incorporated) and Expedia Inc (“Expedia”), together with InterContinental Hotels Group plc (“IHG”) (see Newsletter 1/2014, Newsletter 5-6/2013 and Newsletter No. 4-5/2012 for additional background).
Based on the commitments, all OTAs and hotels that deal with Booking.com, Expedia and IHG, would be able to offer in UK hotels discounts off headline room-only rates, up to the level of their commission or margin, so long as customers:
- Sign up to the membership scheme of an OTA or hotel to be able to view specific discounts (i.e. become members of so-called “closed groups” to whom discounts are offered), and
- Make one undiscounted booking with the OTA or hotel in question to be eligible for future discounts.
Under the commitments, OTAs cannot publicize information about the specific level or extent of discounts outside the closed group.
Skyscanner’s appeal related primarily to this latter publicity restriction, claiming that the OFT did not duly consider the possible effect of the proposed commitments on price transparency, and on meta-search websites. Skyscanner operates a “meta-search” site that displays prices offered by third parties, and thereby assists consumers to compare pricing.
In fact, among the ways in which a consumer could book a room at Hotel Inter-Continental London Limited, other than the IHG website and the OTAs, the OFT appears to have limited itself to have only considered search engines such as Google, whereas meta-search sites were not referred to.
According to the CAT, if a consultation response, such as that from Skyscanner, raises an important and obvious point of principle, it is for the authority to examine it further, particularly so where the authority has not carried out an analysis of the economic effects of the practices which it proposes to address with its commitments decision and where that decision itself may generate its own economic effects within the market.
Interestingly, the CAT noted that “by pursuing its investigation on the basis that it had identified restrictions ‘by object’ the OFT may have deprived itself of the ability properly to appreciate the significance of the role of operators such as Skyscanner, even though it had initially acknowledged the importance of price transparency as a force for competition and was aware, at least, that meta-search operators existed.” The CAT appears to have qualified, albeit indirectly, the practice in issue as a restriction by “effect” rather than “by object”.
Accordingly, in failing to investigate such a plausible point further, the CAT found that the OFT acted unfairly, and that the process by which it subsequently reached its decision was procedurally improper.
Similarly, the CAT held that the OFT acted unreasonably in coming to a decision that effectively ignored the point Skyscanner and others had raised in relation to the potential impact of the publicity restriction on meta-search and competition more generally. The OFT failed to inform itself about the possible impact on price transparency of an obvious and clear restriction on disclosure of price information. In doing so, it failed to take account of a matter of which it ought to have taken account and acted as no reasonable authority should act. The Tribunal concluded that the decision was therefore irrational.
Accordingly the CAT remitted the case to the OFT’s successor, the Competition and Markets Authority, with a direction to reconsider the matter in accordance with the Judgment.