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Expedia, Booking.com and hotel chains accused of price fixing |
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Update: 11:13, Wednesday, Aug 22,2012 (GMT+7)
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Expedia, Booking.com, Starwood Hotel & Resorts and Intercontinental Hotels Group are among online travel sites and hotels accused of conspiring to fix prices for hotel rooms and limiting competition.
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The lawsuit, filed August 20 in the U.S. District Court for the Northern
District of California on behalf of hotel-room purchasers nationally,
alleges that the online hotel retailers conspired with major hotel
defendants to secretly create and enforce Resale Price Maintenance (RPM)
agreements to thwart competition on hotel room prices, especially from
price-cutting online retailers.
The complaint contends that the defendants’ unlawful conduct caused
plaintiffs and other class members to overpay for their purchases of
room reservations and seeks to represent all consumers who have
purchased hotel rooms from the online retailer defendants.
“The large online travel sites, working with hotel chains, have created
the illusion that savvy consumers can spend time researching hotel rates
online to find good deals,” said Steve Berman, managing partner and
co-founder of Hagens Berman, the Seattle based law firm which has been
appointed to represent the claimants.
“The reality is that these illegal price-parity agreements mean
consumers see nothing but cosmetic differences and the same prices on
every site.”
Intercontinental Hotels Group is one of the online travel sites accused of limiting
competition
According to the complaint, online travel sites account for as much as
50 percent of hotel bookings in the United States and traditionally
operate under one of two models.
Under the agency model, online retailers charge a service fee to a hotel
operator on a transaction basis for booking customers, and that
customer pays the hotel directly at a rate set by the hotel.
Under the merchant model, online retailers purchase rooms outright at a
negotiated rate from the hotel, and then resell the rooms to consumers
at a higher price, increasing or decreasing margins depending on
competitive influences.
More recently, a new model has emerged that has cut into the traditional
online retailers’ profits, the complaint contends, and has led to the
creation of the RPM agreements. In this model, known as the Wholesale
Model, third-party companies buy up unsold blocks of rooms at the
last-minute and resell them to smaller price-cutting online retailers,
eroding the profits of the traditional online retailers.
Knowing hotels cannot afford to lose access to online distribution
networks, online retailers devised an illegal scheme, extracting
agreements from the hotels that online retailers may not sell rooms
below the RPM rates – even through the wholesale model – on penalty of
termination and as a condition of doing business through the online
retailers, the lawsuit contends.
The complaint states that the online retailer defendants often use terms
like “best price guarantee” to create the impression of a competitive
market, but in truth these are nothing more than a cover for the
price-fixing conspiracy. “The cold fact is that there are no ‘best
prices’ but instead there is only a fixed price that all the defendant
online retailers tout in unison,” Berman added.
One of Expedia's ads with “best price guarantee”
“We have abundant information that points to the existence of written or
verbal agreements between the online retailers and hotel companies
about the existence and enforcement of RPM agreements,” Berman noted.
The suit alleges that the defendants’ activities violate both the
federal antitrust laws, as well as California’s Cartwright Act.
The defendants named in the complaint include Expedia, Travelocity.com,
Sabre Holdings Corporation, Booking.com, Priceline.com, Orbitz
Worldwide, Hilton Worldwide, Starwood Hotels & Resorts Worldwide,
Marriott International, Trump International Hotels Management, LLC,
Kimpton Hotel & Restaurant Group and Intercontinental Hotels Group.
Nick
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