InterContinental Hotels Regulatory News (IHG)

OFT CONSULTS ON AMENDMENTS TO PROPOSED

HOTEL ONLINE BOOKING COMMITMENTS

The OFT today opened a consultation on revised commitments proposed by Booking.com B.V. (Booking.com), Expedia Inc (Expedia) and InterContinental Hotels Group plc (IHG), designed to address competition concerns in relation to the online offering of room-only hotel accommodation bookings by online travel agents (OTAs).

A Statement of Objections issued by the OFT on 31 July 2012 alleged that Booking.com and Expedia each entered into separate agreements with IHG, which restricted each OTA's ability to discount the rates at which room-only hotel accommodation bookings are offered to consumers. The OFT announced in August 2013 that it was consulting on draft commitments proposed by the three businesses as a means of addressing the OFT's competition concerns, and invited comments from third parties such as other businesses and consumers.

As a result of the consultation and further developments, the OFT currently considers that the original commitments address its competition concerns, subject to the following amendments which the parties have offered:

· Hotel discounting: the commitments clarify that hotels will be allowed to offer discounts in an equivalent manner to OTAs

· Geographic scope: the commitments will apply to bookings made by European Economic Area residents for rooms in UK hotels, rather than to bookings made by UK residents for rooms in EU hotels

· Duration: the commitments will apply for a period of two years, rather than three years

The OFT is minded to accept the commitments as revised, and is inviting interested third parties to comment.

Ann Pope, Senior Director in the OFT's Services, Infrastructure and Public Markets Group, said:

'The OFT considers that these revised commitments should inject a meaningful degree of price competition into the online offering of hotel bookings.

'We would now like to hear the views of interested third parties, in particular on the amendments being proposed.'

Anyone wishing to comment on the revised commitments should submit views to the OFT by 17January 2014 to:

Hotel Online Booking Team (SIP)Office of Fair TradingFleetbank House2-6 Salisbury SquareLondon EC4Y 8JX

Email: hotelonlinebooking@oft.gsi.gov.uk 

NOTES

1. Room-only hotel accommodation refers to hotel accommodation that is offered on a 'standalone' basis without any other travel components such as flights or car hire. OTAs do not take title or hold inventory to hotel accommodation.

2. The Statement of Objections was addressed to the following companies:- Booking.com B.V. ('Booking.com') and its ultimate parent company Priceline.com Incorporated ('Priceline')- Expedia, Inc ('Expedia')- InterContinental Hotels Group plc ('IHG') and- Hotel Inter-Continental London Limited ('IH London').

3. In focusing the investigation on a small number of major companies, the OFT took into account that Expedia and Booking.com are two of the largest OTAs in the UK, each operating on the basis of a different principal business model. IHG is the largest hotel company world-wide, measured by room numbers. 

4. The Competition Act 1998 empowers the OFT to accept such binding commitments from parties under investigation as it considers appropriate to address the OFT's competition concerns. Where the OFT proposes to accept the commitments offered, it will consult those who are likely to be affected by them and give them an opportunity to give the OFT their views. Where the parties to the investigation subsequently offer revised commitments which include modifications which the OFT considers to be material, the OFT will allow another opportunity for any interested third parties to express their views. The OFT will take any representations of third parties into account before taking a final decision on whether or not to accept the proposed commitments as modified.

5. When the OFT has formally accepted commitments, it must close its investigation into the agreements that were the subject of the investigation. The OFT may re-open its investigation and take other action in certain limited circumstances (for example, where it has reasonable grounds for believing that there has been a material change of circumstances since the commitments were accepted).

6. Any decision by the OFT accepting binding commitments will not constitute a determination as to the legality or otherwise of the conduct by the parties under investigation either prior to acceptance of the commitments or once the commitments are in place.

7. Unlike OTAs, which under the proposed commitments may only use their commission revenue/margin to fund discounts (the commission cap), discounts offered by hotels to closed group members would not be subject to such a cap.

8. The OFT is aware of a significant amount of enforcement activity by other national competition authorities across the European Competition Network (ECN) and by competition authorities of the European Free Trade Association ('EFTA') Member States in the hotel online booking sector. This has informed the proposed revised scope of the commitments. The OFT intends to continue to cooperate with its counterparts within the ECN and the competition authorities of the EFTA Member States to help secure benefits for UK consumers where restrictions of competition in this sector in other jurisdictions have an impact on them.

9. You can see all updates on this case on the project webpage. 

10. The OFT currently has 12 cases open under the Competition Act 1998, listed at www.oft.gov.uk/OFTwork/oft-current-cases.

11. On 1 April 2014, the Competition and Markets Authority (the CMA) will become the UK's lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the OFT and the responsibilities of the Competition Commission, as amended by the Enterprise and Regulatory Reform Act 2013. The CMA, which is a non-Ministerial government department, was established on 1 October 2013 and will be taking on responsibility for cases, market studies and other work from 1 April 2014. Click on the CMA's homepage for more information.

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