Duff on Hospitality Law

Both regulatory investigations and consumer complaints feature prominently in this week’s distribution news.

Booking.com Weighs In On the Need for Further EU Regulation
("Big tech firms push back against possible EU antitrust reforms," MLex, December 14, 2018) (subscription required)
Along with other technology giants, Microsoft, Google, Facebook and Spotify, Booking.com submitted last week its response to an European Commission consultation seeking feedback on whether current EU competition rules needed updating to deal with the evolving digital economy. Not surprising, the technology platforms were unanimously opposed to any updates to existing competition rules, arguing that the digital sector remains highly competitive and subjective to disruption. Booking.com, however, in a break from the others, argued in favor of strengthening the Commissions’ competition enforcement resources, in part, to avoid the patchwork of investigations and enforcement actions Booking.com has faced from individual EU member states.

This week’s Update features a variety of stories on traditional GDS, metasearch and wholesale channels. Enjoy.

Global Distribution Systems Noted by Appeals Court As Being “Rather Backwards"
("Sabre urges appeals court to scrap jury verdict in dispute with US Airways," MLex, December 14, 2018) (subscription required)
The US Court of Appeals for the Second Circuit heard arguments last week on Sabre’s attempt to overturn a jury’s finding that Sabre’s contracts with US Air were anti-competitive. According to Sabre, the disputed “full content” provisions found in its airline contracts are similar to the recently upheld provisions found in American Express’ merchant agreements under which merchants are prohibited from directing transactions away from American Express. According to the US Supreme Court, American Express’ agreements were permissible, in part, because American Express operates a “two-sided” platform (a platform where through incentives and other benefits merchants and card holders are brought together). In its appeal, Sabre argued that it too operates a two-sided platform (airlines and travel agents), an argument that had been previously rejected at the trial court level. In comments during the appeal’s proceeding, the Circuit Judges expressed doubts over Sabre’s arguments stating that the GDS’ technology was outdated and that the industry’s three remaining participants were “rather backwards.”

Is it just my generally biased view of online travel platforms or are regulators finally taking a hard look at the sometimes questionable practices of these channels? Enjoy.

French Authorities to Examine Travel Platforms’ Pricing Practices
("Hotel platforms may face French antitrust probe for excessive pricing, de Silva says," MLex, December 5, 2018) (subscription required)
In a statement last week, the head of the French Competition Authority announced that online travel platforms operating in France, like Booking.com, could soon face antitrust scrutiny over the allegedly excessive prices charged hotels for displaying their rooms. While these types of cases are relatively rare, there has been a recent revival of excessive pricing investigations in several European Union countries. Should this investigation go forward, it will be interesting to note whether the French Competition Authority believes that Booking.com (or other online platforms) enjoys such market dominance that it is able to demand excessive prices.

Following last week’s holiday break, we are once again sharing each week what we feel are the most noteworthy stories in the distribution, loyalty program and (occasionally) short-term rental fields/industries. We hope you enjoy.

Global Distribution Systems Become Latest EU Target
("European Commission Is Probing Travel Distribution Systems for Anticompetitive Practices," Skift Travel News, November 25, 2018)
While we routinely feature stories detailing competition authorities’ pursuits of the major online distributors, it is rare for those same authorities to announce an investigation or enforcement effort directed against the legacy global distribution systems. This past holiday week, however, the European Commission announced investigations of both Amadeus and Sabre over their possibly anti-competitive contracts with airlines and travel agents. According to the Commission’s announcement, it was looking into whether the GDS’s “full content” contract clauses illegally prohibited airlines and travel agents from distributing and/or sourcing tickets through alternative channels. Those familiar with the issue will recall the number of lawsuits in recent years between airlines and the GDSs over airlines’ desire to distribute inventory through alternative channels.

Stories detailing investors’ renewed interest in travel technology feature prominently in this week’s stories.

Lola Finds a Home?
("Will Lola’s New Partnership With AmEx Revive the Struggling Startup?" Skift Travel News, November 13, 2018)
Readers of our Update will likely recall the many stories we have featured over the past few months about Lola, the mobile-only, chat-powered travel booking application featuring real live AI-enabled travel agents. Since introducing the application in 2016, co-founder Paul English has evolved Lola from a leisure / business travel application, to an individual business travel application, to now, with its recently announced partnership with American Express Global Business Travel, a broad-based, managed business travel application for the masses. With this partnership, Lola gains access to thousands of repeat business travelers (together with the benefit of American Express’ many preferred hotel and airline connections), while American Express gains access to technology that may allow it to provide travel management services to businesses traditionally too small to use American Express’ traditional travel tools.

Regulation of Large Online Platforms is Coming to Japan
("Online platforms may face stricter rules, enforcement in Japan, panel says," MLex, November 5, 2018) (subscription required)
Following up on a story (and prediction) included in last week’s Update, it appears that Japan (through a panel of experts operating under the direction of the Japanese Ministry of Economy, Japanese Ministry of Trade and Industry and Japan Fair Trade Commission) is definitely heading toward more aggressive review and likely regulation of large online platforms operating within Japan. The 15-member panel has been working since July and expects to begin interviews next month with representatives of the online platforms as well as the domestic businesses that deal with them. The results of the panel’s efforts will serve as the basis for establishing key principles for regulating the platforms (which may then take the form of amendments to existing laws and regulations or new ones). Additional detail about the panel’s work and the direction it is headed should be available toward the end of the year.

This week’s Update features a variety of stories covering search, short-term rentals, wholesalers and traditional OTAs. This week's highlights include:

Much Ado About Nothing
("How Google's Newly Expanded Trademark Policy Will Impact Hotels," Duff on Hospitality Law Blog, October 24, 2018)
Over the past several weeks there have been a number of prominent stories in the traditional travel technology, distribution and sales and marketing outlets lamenting the profound effects of recent changes to Google’s trademark and keyword practices. These stories prompted my trademark colleagues to re-examine Google’s policies and to update our clients on what, if anything, really changed. As you can read from their recent blog post below, not a lot has changed.

This week's Update includes a story detailing yet another state’s efforts to close existing tax loopholes so that it may collect proper sales/occupancy taxes from OTAs. I hope you enjoy.

Pennsylvania Closes Tax Loophole
("PA Senate Approves Bill to Close Sales Tax Loophole with Online Travel Companies, PA Senate GOP, October 26, 2018)
For years now we’ve read and featured stories about enterprising legal counsel convincing state and local governments to pursue claims against merchant-model OTAs for failure to pay sales or occupancy taxes on the full selling price charged to guests by the OTAs (instead of paying taxes only on the net rate paid by OTAs to the hotel supplier). More often than not these claims ended in decisions against the local governments on the basis that the operable tax statute was not written to apply to the mark-up or margin added by OTAs to the net rates they received (among other things).  Pennsylvania is determined to do something about that. Last week, the Pennsylvania Senate passed legislation making clear that the State’s sales tax applies to the full selling price charged by OTAs operating in the State. The Senate passed legislation now moves on to the Pennsylvania House of Representatives for further consideration.

Booking Holdings, Expedia Group and...Kiwi? 
("Online Travel Agency Kiwi Has a Plan to Fight the Giants," Skift Travel News, October 18, 2018)
Conventional wisdom says that start-ups in the online travel agent space will never make it far because of the absolute dominance of established platforms, Booking Holdings, Expedia Group, etc.  Kiwi, a Czech Republic based startup, may be proving otherwise. Through a combination of superior guest service, currency arbitrage, diverse demand generators, powerful partnerships and just plain luck, Kiwi is making a name for itself. This past year alone (2017) it processed airline bookings with a gross value of over $925 million. This year it expects to earn over $200 million in revenue. Whether Kiwi can continue its luck streak remains to be seen, but Kiwi is definitely a name to remember.

Google recently updated its trademark policy, and although some believe the changes are cause for concern, citing increased costs per click, that may not be the case. The following aims to bring some clarity to the issue.

Google has consistently expanded its Google Ads policy in allowing trademark keyword bids and the use of trademarked terms in the text of advertisements. The tech giant has always expanded these policies by regions, and just last week, Japan was added to the mix.