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Don Scaramastra has provided an update for our readers on the status of the class-action involving online distributors and certain hotel operators with regards to antitrust laws related to online distribution. Catch up on the original post here and continue reading for an update on this topic. – Greg 

On May 1, 2013, plaintiffs filed a consolidated amended complaint in the OTC/Hotel Booking Antitrust Litigation. The amended complaint formally consolidates the many different complaints that were consolidated before the federal district court in Dallas last December.

But the amended complaint does more; it names a number of additional defendants. Most are hotel companies: Wyndham Hotel Group, Carlson Hotel Group, Best Western, Choice Hotels, and Hyatt Hotels. But one notable new defendant, EyeforTravel, Ltd., is not. EyeforTravel describes itself as a global media company specializing in business intelligence for the travel and tourism industry. This post will focus on the allegations against EyeforTravel because they highlight issues and dangers different from those I covered in my last post regarding this case.

According to the amended complaint, EyeforTravel annually sponsored industry conferences that “became a forum where [unlawful] agreements were confirmed” and discussed. The amended complaint refers to brochures and announcements regarding these conferences, which indicate that topics discussed included “revenue management and price,” “rate parity,” “strategies for restriction of free pricing,” “how large travel suppliers are dealing with pricing pressures attributed to third party distributors,” “why rate parity is necessary,” “best practices for managing revenue in a down market and avoid rate erosion,” and the “dangers of chasing demand by lowering your prices.”

Several clients have lately been asking about notices they've received that look like this. If they come from the Eastern District court in New York, they’re legitimate, and if you are a merchant who accepted Visa or MasterCard or both between January 1, 2004 and November 28, 2012, you are a probably a member of the class and should have received one too. If you didn't, the lawsuit and proposed settlement are discussed in detail here. Take a look; the settlement could affect your legal rights.  You have until May 28, 2013 to exclude yourself from the settlement (opt-out) or object to its terms; the final hearing on the proposed settlement will be September 12, 2013. Assuming the court approves the settlement, with or without changes that may occur as the result of objections, claim forms will be issued after that date to class members and a claim deadline will be set.

First-time contributor and resident litigation expert, Don Scaramastra, has offered to update the status of the much discussed class-action involving online distributors and certain hotel operators, and to discuss antitrust laws related to online distribution.  Thank you Don for this informative piece.

On December 11, 2012, the federal Panel on Multi-District Litigation ordered the consolidation of class-action lawsuits alleging that online travel agents and certain hotel chains conspired to impose a resale price maintenance scheme that fixed the retail price for hotel room reservations in violation of federal and state antitrust laws. The MDL Panel ordered these lawsuits to proceed in the U.S. District Court for the Northern District of Texas. Since last summer, over 20 such lawsuits have been filed. This outcome appears to be good news for the defendants, all of whom advocated for the transfer and consolidation of these cases to that district.

You might be wondering what these lawsuits are all about, what “resale price maintenance” (or “RPM”) is, and what the antitrust laws have to say about it.

RPM is the practice in which a seller and buyer at one link in a distribution chain agree on the minimum price that the buyer may turn around and resell the product.

RPM has something of a storied history in antitrust law. Under federal antitrust laws, RPM was deemed unlawful just over a century ago. But in the 1930s, Congress enacted a partial “fair trade” exemption from liability. Four decades later, Congress repealed the exemption, returning RPM to its former illegal status. And finally, five years ago, in Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court declared that not all RPM agreements were illegal, only those that imposed an “unreasonable” restraint on trade. And that is where things stand today.

The United Kingdom's Office of Fair Trading (OFT) issued a Statement of Objections this Tuesday alleging that industry giants B.V., Expedia, Inc. and InterContinental Hotels Group violated the UK’s Competition Act of 1998. The Statement of Objections will not be made public, but from OFT’s comments, it’s rate parity and best rate guarantees that are causing the trouble.

Requiring on-line travel agents (OTAs) to honor a hotel supplier’s best rate guarantee (at retail) and requiring hoteliers to provide inventory to distributors at the same price across all distribution channels are as close to universal practice in this industry as I have seen. And now, OFT appears to consider them by a less salubrious name: price-fixing.   However, the Statement of Objections is not “the final word." It is a sort of pre-trial opinion in which OFT provides official notice of a “proposed infringement [of the Competition Act 1998] decision” and the parties to the dispute may make written and oral arguments to be considered before final decision is rendered. 

OFT’s statement was issued at the end of an investigation begun in 2010 after a complaint was made by Skoosh, a small British OTA. Skoosh contacted OFT after Skoosh’s own hotel suppliers demanded that Skoosh raise its retail rates to a certain figure (among other allegations). The hoteliers, of course, were apparently acting to meet pressure applied by Booking and Expedia not to violate what was almost certainly a contractually required rate parity obligation of some sort. In effect, Skoosh raised concerns with OFT that rate parity and best rate guarantees operate together to artificially fix prices in the marketplace and therefore act as a barrier to competition, particularly for new or smaller players, like Skoosh, who might be willing to undersell the larger OTAs to grow its business.

If OFT formally issues a finding of an infringement, despite its jurisdiction being limited to the UK, the finding will cause--at a minimum--a shift in the way a significant majority of the hospitality industry conducts its distribution business, as well as the amount of competition in the marketplace. The Internet, after all, is international. So please stay tuned!

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Greg Duff
Greg Duff founded and chairs Foster Garvey’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.

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