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August 30, 2012 / Christian Przybylowski

Best Price Guaranteed: Online Travel Sites Implicated in Price Fixing

A new class action lawsuit has been filed in San Francisco against a variety of well-known hotel chains and online travel sites, including Expedia.com, Travelocity.com, and Marriott. The lawsuit alleges that these large online travel retailers and hotel chains have been conspiring to fix room prices as a way to prevent smaller travel services from selling the rooms more cheaply.   The companies are accused of setting minimum room rates in violation of federal and California state antitrust laws.  As part of the alleged price-fixing agreement, hotel operators would not do business with online travel sites who would sell the rooms beneath the minimum threshold.

The lawsuit comes on the heels of an announcement or preliminary findings by British regulators that the hotel chains and online travel companies are in breach of UK competition laws.

The online travel sites have been able to use their substantial market power to get hotels to impose and enforce the minimum prices.  Hotel room reservations through online travel sites currently accounts for up to fifty percent of hotel bookings in the US, according to the complaint.  With a substantial portion of their business coming from online travel sites, hotels have been forced to abide by the agreements.  According to the complaint, if a smaller online travel site attempted to sell the room below a certain threshold, the hotels would require the smaller travel site to raise their markup to bring the customer price in line with what other travel sites offered the rooms for.  Additionally some hotels would threaten legal action against the offending sites or refuse to work with them in the future.  If the hotels did not do so, they risked negative placement or removal from the larger online travel sites.

The complaint alleges these agreements were developed over the years through contracts, meetings, and industry conferences.  The existence of the agreements is also evidenced by various communications, in which industry insiders essentially acknowledge the practice as part of the business.

As a result, customers have been paying artificially inflated rates for hotel rooms for years.  The sites advertise that consumers can find the best or lowest price.  In reality, there is only one fixed uniform price.

Should the agreements be found to exist the various defendants could face damages for: violation of the Sherman Antitrust Act (15 U.S.C. § 1 “agreements unreasonably restraining trade), violation of the California Cartwright Act (California Business and Professions Code § 16720, et seq.), violation the California Consumer Legal Remedies Act (Civil Code § 1750, et seq. “false advertising”), and unfair competition and business practices. (California Business and Professions Code § 17500, et seq. and § 17200, et seq.)

The class includes all people who have booked a hotel room at a Starwood Hotels property, a Marriott International property, a Trump International Hotels property, a Hilton Worldwide property, or a Kimpton Hotel and Restaurant Group property, and the room was booked through Expedia.com, Hotels.com, Travelocity.com, Booking.com, or Orbitz.com.  Customer who made room reservations as part of a package deal, or where the name of the hotel was not disclosed until after payment, are exempt from the class.

If you or a loved one have booked a hotel room using a major online travel site, please contact Khorrami, LLP for a confidential evaluation of your rights.

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