01 August 2012 10:17
British holidaymakers are likely to have been overcharged for hotel rooms because of a price-fixing scandal involving some of the world's biggest online travel companies, the Office of Fair Trading has revealed.
The consumer regulator disclosed on Monday that it is poised to take action against a number of online travel companies and major hotel chains for conspiring to fix the cost of rooms. Hotels were effectively banned from selling rooms cheaply, with the huge global online travel agents accused of illicitly setting a minimum price to stop their prices being undercut. Hotels refusing to use the minimum price were threatened with removal from the sites.
Expedia, one of the world's biggest online travel firms, has admitted it has "engaged in cartel conduct on breach of the law". It is now co-operating fully with the investigation and is understood to be providing information on its rivals under a "leniency deal". The other companies involved in the alleged price-fixing face massive fines, with the OFT currently focusing its investigation on Booking.com, Intercontinental Hotels and other firms.
Yesterday, the regulator announced that its provisional view was that a number of firms had breached competition law and served the companies with so-called "statement of objections" notices. Clive Maxwell, the chief executive of the OFT, said the watchdog was awaiting the firms response to the notices.
"We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers," said Mr Maxwell.
The OFT can fine companies up to ten per cent of annual turnover worldwide if they are found to have breached competition law by fixing prices. Competition law specialist Jason Logendra from Watson, Farley & Williams said that Expedia could avoid a fine completely if it provided the OFT with information showing that other companies had broken the law.
"If it is the only company that has applied for leniency, it could receive up to a 100% reduction in its fines if the OFT did not have sufficient information to establish that the companies had breached competition law before the leniency application," said Mr Logendra.
"However, if the leniency application was received fairly recently, it is more likely that Expedia's fines would be reduced by around 25% to 50%."
The case could pave the way for consumers to seek compensation for hotel rooms they have booked through the sites over the past few years.