September 13, 2012
Have they made any kind of “price guarantee” that promises that you won’t find a lower rate on any other such retailer website?
According to a lawsuit filed last week, there’s a disreputable reason for that: those online retailers are conspiring with each other and the hotels that they sell rooms for to maintain artificially-inflated prices.
In other words, they are all allegedly engaged in a massive price-fixing scheme.
The lawsuit, which is seeking class action status, is directed against just about every online hotel-booking retailer out there: Expedia, Hotels.com, Travelocity, Booking.com, Priceline.com, and Orbitz.
In addition, the complaint also names as defendants several major hotel chains, such as Hilton, Marriott, and Trump International.
At 34 pages long, the complaint also isn’t scant on the details.
It describes the history of online hotel-booking, the intimate details of the forming of the alleged cartel, and how newer online retailers were threatened with legal action if they attempted to discount hotel rates below the price floor.
The complaint provides an actual example of this price-fixing with examples of prices from several different online retailers for the same hotel on the same date – with all of them being the same price.
Hot Doc: Ellens v. Expedia Inc. et al.
Coincidentally, I was looking at hotels earlier this week and noticed this myself.
I checked prices on the hotel’s official website, and then on Orbitz, Hotels.com, Expedia, and Priceline.
All of them had the same, exact rate, which I found kind of odd at the time (but I didn’t really have the time to think about it too much).
So this price-fixing allegation actually makes sense.
I’ve been booking hotels online for over ten years now, and, now that I think back, things used to be much different; you’d actually get different prices from different websites.
Now, it’s the same price everywhere you look.
And the complaint specifically states that this scheme isn’t just due to the hotel defendants’ enforcing a minimum resale price, suggesting resale prices that were widely followed, or any other behavior that retailers are entitled to as part of the free market system.
Instead, the complaint makes it very clear that this is a common scheme between the hotels and the online retailers to fix hotel room prices – just the allegations needed to make the Sherman Anti-Trust Act civil action stick.
The complaint doesn’t stop at alleging violations of federal law, though; it also lists 27 different state statutes that have allegedly been violated by this scheme.
How has the plaintiff been harmed by this scheme, though?
According to the complaint, and as is almost always the case with price-fixing schemes, the price floor was set well above the normal market rate.
As a consequence, the plaintiff has paid an artificially-inflated price for hotel rooms – along with the millions of others who have booked hotels online with any of the defendants within the past eight or so years.
Whether this suit can break up the alleged cartel, or, worse yet for the defendants, get the Justice Department involved, remains to be seen.
However, as someone who uses these websites to book hotels, I certainly wouldn’t mind seeing some price competition for a change.