Online travel firms investigated for price fixing

Towards the end of July the Office of Fair Trading released a statement alleging some of the world’s largest online travel companies have been involved in price fixing. Other than a couple of newspaper articles, it doesn’t seem to have attracted a huge amount of attention. However, I don’t think this is the last we’ve heard about this scandal.

The OFT started investigating the allegations made by small online travel company back in 2010. The companies involved so far are Expedia, Booking.com and Intercontinental Hotels Group (IHG). At this stage it is thought that the alleged practices are widespread throughout the industry. Essentially the online travel companies banned hotels from selling their rooms cheaply. The online travel companies did this to stop their prices being undercut by competitor agents. If a hotel refused to do so they were threatened with removal from the travel company’s website.

So far Expedia have confirmed they have “engaged in cartel conduct on breach of the law” from October 2007 to September 2010. They are fully co-operating with the OFT’s investigation, it’s reported that they are even providing information on their competitors under a leniency deal. Booking.com and IHG both deny any wrong doing and have three months to respond to the OFT’s investigations.

If found guilty of fixing prices, the OFT can enforce fines up to 10% of annual turnover worldwide. If Expedia are the only company to apply for leniency, they could avoid the fine altogether. Firstly, they would need to prove that other companies have broken the law. If they don’t see 100% of the fine waived it could be reduced by around 25% to 50%. Surely the point of imposing a fine is to deter other companies from offending, or the guilty companies re-offending.

Key statistics from the OFT’s website show that:

  • In 2010, the revenue generated from UK hotel room bookings was approximately £10.1 billion.
  • £849 million of that revenue was booked online.
  • The UK’s online travel agency sector is the largest in Europe, in 2010 the industry turned over around £5.3 billion in 2010.
  • The alleged misconduct between Booking.com and IHG started on the 1st January 2007 and is ongoing.

The investigation isn’t only looking into domestic room rates but also international bookings. It is likely that many UK consumers that have used these sites have being overcharged since 2007. If they are making their reservations through Booking.com or IHG, then it is likely that they are still being overcharged.  It has been suggested that consumers may be able to claim compensation for bookings made with these companies over the last few years.

Consumers use the internet to shop around for the best deals, regardless of the product. Certainly in Expedia’s case (because they’ve admitted it) they have only been in a position to offer the best deals because they manipulated and bullied the market (those weren’t Expedia’s words). The problem was they weren’t the market/hoteliers best deals but all that the online travel agents were prepared to offer.  Depending on the outcome of this investigation and the media exposure it attracts, it could potentially affect consumer confidence in other industries when shopping online. Justified or not!

I don’t think this will be my only blog in relation to this investigation, but for now please leave a comment below, email at the station Jodi.stuart@realradio.co.uk or tweet me @realradiojodi

Also please get in touch if you are setting up a ‘holiday scam claims’ company to talk about advertising 🙂

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