CMA secures commitments from holiday booking sites on sales practices

The CMA has concluded investigations into the sales practices of six hotel booking sites. Expedia, Booking.com, Agoda, Hotels.com, ebookers and trivago have all entered into legally binding commitments in relation to: making it clearer as to whether hotels have had to pay commissions to rank higher in search results; displaying all compulsory charges such as taxes and booking or resort fees; and not engaging in identified pressure selling practices or misleading discount claims.

The CMA has said that it will continue to monitor the activities of hotel booking sites to ensure they comply with their commitments. It has also announced that it will be writing to other stakeholders in the industry such as travel agencies, search engines and hotel groups to make sure they meet the same standards as the commitments offered by the hotel booking platforms. If these are not respected, the CMA may take further enforcement action.

The investigations further highlight the increasing use of consumer enforcement powers alongside competition powers; the CMA and a number of competition authorities across Europe having initiated both competition investigations into the sector (on the use of MFN or pricing parity clauses) and now consumer protection investigations into sales practices. These cases also have wider implications for online sales platforms operating in other markets, so should be looked at and considered carefully.

Hotel booking sites get both barrels

Over the last few years, competition regulators in the UK, Germany, France, Sweden, Italy and elsewhere have commenced investigations into most favoured nation clauses, known as ‘MFN’ or ‘price parity’ clauses. These clauses usually imposed by larger booking platforms such as Booking.com and Expedia required hotels to offer their most attractive rates and conditions through their booking platforms compared to any other distribution channel or even the hotel’s own online and offline offers.

Competition investigations into MFNs

MFN clauses are considered to be restrictive of competition because they: i) reduce competition between online distributors; ii) lead to higher prices for hotel rooms; and iii) create barriers to entry for smaller or new distributors. However, competition authorities within the EU and globally have tackled these restrictions with varying levels of enforcement leading to a complex picture in terms of compliance.

The first round of enforcement occurred in 2015 when Booking.com and Expedia offered binding commitments in several jurisdictions agreeing not to enforce strict MFN clauses in their contracts to avoid punishment. Instead, the authorities and the platforms reached a settlement agreement to opt for a lighter version of MFNs. The new narrower MFN clauses allow platforms to seek better terms than on the hotel’s own website but hotels remain free to offer better deals through other distribution channels (i.e. smaller competing platforms, offline channels etc.). Since then, many jurisdictions such as Italy, France and Germany have now gone a step further and banned MFN clauses entirely. That being said, these practices continue to be monitored and widely investigated. In the last two years, competition authorities in Denmark, Sweden, Finland and Singapore have all opened new investigations on this topic.

In the UK, the CMA has accepted the use of narrow MFN clauses (following commitments offered by Booking.com and Expedia in 2014) but it continues to look closely at the activities of holiday booking platforms. The CMA has now decided to look at the same platforms focusing on consumer law protection. Indeed, the CMA’s powers cover both competition and consumer protection law and the government is particularly keen to ensure that the CMA enforces these rules in a digital context. For example, the CMA has also recently looked at consumer protection for secondary ticket websites and celebrity endorsements on social media.

Consumer enforcement investigations into unfair / misleading sales practices

In late October 2017, the CMA launched an investigation into hotel booking sites over concerns that these sites were misleading consumers and preventing them from finding the best deals. The CMA’s investigation specifically looked at four practices commonly found on booking sites:

1. Search results – whether hotels are genuinely ranked on the site based on consumer requirements as opposed to the commissions paid by the hotel;
2. Pressure selling – typically in the form of pop ups claiming that other travellers are looking at the same room or that the room price is only available for a limited period of time in order to rush consumer decisions;
3. Discount claims – whether discounts were being advertised with a genuine full price reference point or being compared to inflated rates to make them look more attractive;
4. Hidden charges – whether customers were charged hidden fees as they progressed through the online booking journey.

In order to gain a better understanding of how these sites operate, the CMA sent out questionnaires to both customers of hotel booking sites and accommodation providers. Ultimately, the investigation resulted in the CMA announcing on the 6 February 2019 that it had secured binding commitments from six holiday booking sites, with sets of undertakings being given by Agoda, Booking.com, Expedia, and Trivago (note: Expedia owns Trivago, ebookers and Hotels.com). Under these undertakings, the companies agree to change the practices which the CMA has identified as being misleading to consumers. This is return for the CMA not taking further formal enforcement proceedings against them in the High Court. If any of the companies breaches its undertaking, the CMA can commence court proceedings in the High Court seeking a formal enforcement order against the company. The changes required under the undertakings have to be in place by no later than 1 September 2019.

The CMA will continue to monitor the activities of hotel booking sites to ensure they comply with their commitments. It has also announced that it will be writing to other stakeholders in the industry such as travel agencies, search engines and hotel groups to make sure they meet the same standards as the commitments offered by the hotel booking platforms. If these are not respected, the CMA may take further enforcement action.

Comment

Although the industry has already been scrutinised by competition authorities across the globe, those active in the sector and especially those with global operations should be mindful of the different approaches taken in different jurisdictions both in terms of respecting MFN rules and consumer law requirements as many countries continue to launch new investigations in both of these areas. The cases and commitments being given should also be considered carefully by any businesses operating in markets involving online sales platforms, of which there are obviously very many.