For those of you keeping score at home, it’s now Skyscanner, 1 – OTAs, 0, in the legal game that’s developed around planned hotel rate discount schemes in the United Kingdom.

In a win for Scotland-based metasearch company Skyscanner, a tribunal has quashed a deal agreed upon last winter among Britain’s competition authority, the online travel agencies and Expedia, and global hotel chain owner InterContinental Hotels Group (IHG).

The tribunal sided with Skyscanner in its appeal of the decision by Britain’s new regulator Competition & Markets Authority (CMA).

The regulator will now have to revisit the issue and perhaps do a full antitrust investigation around competition in hotel room rates. (See text of the decision, below.)

The deal enabled online travel agencies (OTAs) and hotels to offer discounts to consumers who joined a closed membership scheme.

The OTAs would have been required by hotels to prevent rate discounts from being publicised outside the membership group — something Skyscanner protested.

The ruling would mean OTAs and hotels would have to renegotiate their contracts with other parties to make sure that any promises of transparency or best-rate parity were removed.

The secrecy would have a knock-on effect for metasearch companies like Skyscanner, which would no longer have access to displaying the lowest rates available in the market.

Skyscanner had a smaller OTA, Brighton-based Skoosh, act in legal support in the case, and the ruling would affect smaller OTAs and potential new entrants, too.

Skyscanner appears to have persuaded the tribunal (see decision, below) by having made broader arguments about competition. Its reasoning was approximately this:

If the hotel discount clubs — currently a theoretical idea — became real, the clubs might become popular. Consumers would join to get access to discounted rates only after having made a first full-price booking.

If the clubs became popular, consumers would be less able to comparison shop without joining multiple clubs. That could lead to a trend in reduced comparison shopping, which could lead to reduced pressure on suppliers to be competitive in offering rates.

Skyscanner’s general counsel Carolyn Jameson told Tnooz by phone that the company was pleased its appeal was a success.

“Its a victory for us but it’s more importantly a victory for consumers.”

Carolyn Jameson Skyscanner counsel

Membership schemes are common in other commerce sectors, such as retail, where consumers pay to join a “club” where they get access to discounted rates.

It is possible that the relative transparency of the hotel rate clubs being proposed and the ones found in other retail sectors may be a relevant factor in the authority’s ultimate decision.

The newly established CMA would not want to have its follow-on ruling later overturned by a tribunal as well. So it is incentivised to look at this case closely.

The falling apart of rate parity in Europe

Dorian Harris, owner of the OTA Skoosh, said by phone that this was just a skirmish in a five-year industry battle over the overarching issue of hotel rate parity, in which commercial contracts restrict online travel agents from offering lower rates than those the hotel offers itself through its own sales and marketing channels.

Harris says:

“Expedia and have been endlessly harrassing hotels listed on our site that those hotels have got to stop unless they comply with rate parity….

We are considering applying for an injunction to ensure measures bring rate parity to a halt while CMA is completing its renewed investigation. Otherwise, we’ve come to nothing, not moved forward at all.”

Hotel rate parity has been under regulatory attack throughout Europe recently, and it is also under assault by the rise of mobile-only players, who are not tied to the same contracts.

Rate parity has essentially been ruled illegal in Germany this year, and a major European hotel association has asked its members not to sign any more contracts with rate parity clauses.

For more on rate parity, see Tnooz’s article: “Expedia and pledge to allow rival discounting as hotel rate parity probe widens“.

Here’s the text of the ruling by the Competition Appeal Tribunal:

Skyscanner Judgment CAT 16 260914

Original author: Sean O’Neill