Tribunal Forces UK Competition Authority To Rethink Hotel Bookings Settlement

Author:Mr Stephen Mavroghenis, James Webber, Jessica K. Delbaum and Heather L. Kafele
Profession:Shearman & Sterling LLP
 
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The UK Competition Appeal Tribunal (CAT) quashed the decision of the Office of Fair Trading (OFT), now the Competition and Markets Authority (CMA), to close its investigation into pricing arrangements entered into by Booking.com, Expedia, and InterContinental Hotels.1 The OFT closed its investigation after the parties had offered behavioural commitments.

Skyscanner, an operator of a meta-search engine for hotel bookings, flights and car hires, appealed the OFT's decision because it was concerned that the commitments accepted by the OFT harmed Skyscanner's business.

Under section 31A of the Competition Act 1998, instead of issuing a prohibition decision, the OFT may accept commitments which address its concerns. When commitments are accepted, the investigation generally comes to an end. A decision to accept commitments can be appealed to the CAT by third parties but only on judicial review grounds.

Skyscanner's appeal was the first appeal brought against a UK commitment decision. Its success will encourage companies to closely monitor commitment negotiations taking place in their industry and to raise objections if they fear their business may be affected.

The judgment also shows that the settlement route is not a risk-free choice. For the parties, settlement may not represent a watertight early "exit" route from investigation. For the authority, it reminds the CMA that accepting commitments does not release the authority from its duty to build a robust case and to carefully examine the potential effects of any intervention.

The Investigation

In September 2010, the OFT opened an investigation into the online supply of room-only hotel accommodation bookings by online travel agents.

The OFT alleged that Booking.com, Expedia and InterContinental Hotels had infringed EU and UK competition rules by entering into arrangements which restricted Booking.com and Expedia's ability to discount the rate at which room-only hotel accommodation provided by InterContinental Hotels were offered to consumers. In particular, the parties agreed to offer bookings at a day-to-day room rate set and/or communicated by the hotel and not to offer room bookings at a lower rate, for instance by funding a promotion or discount from their own margin or commission.

To address the OFT's concerns, the parties offered commitments allowing Booking.com and Expedia to offer discounts from headline room-only rates. However, such discounts were only offered to members of closed groups, to which...

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