Reed Smith Client Alerts

Authors: Edward S. Miller Marjorie C. Holmes

Type: Client Alerts

A decision by the UK’s former competition authority, the Office of Fair Trading (OFT – now replaced by the Competition and Markets Authority (CMA)) to accept commitments to settle its investigation into on-line prices for hotel rooms has been quashed by the UK Competition Appeal Tribunal and sent back to the CMA to decide again.

As noted in a previous alert on the case (http://www.reedsmith.com/UK-Regulator-Ready-to-Settle-in-Online-Hotel-Room-Price-Fixing-Probe/), a striking feature of the commitments given to resolve the original investigation was the absence of a clear commitment regarding MFN or price parity clauses which oblige hotels to guarantee that a website is being offered the best price by the hotel. Indeed, a feature of the commitments was that, although websites would henceforward be allowed to discount room prices by sacrificing a part of their commission, the websites could be obliged to keep these deals secret by limiting them to certain classes or “clubs” of customers. Price comparison sites, such as the appellants, Skyscanner and Skoosh (also the original complainant) had made the point to the OFT that the effect of hiding these discounts was that the discounted prices would not be picked up by the search tools used by price comparison sites, thus restricting transparency and competition.

On appeal, the Competition Appeals Tribunal (CAT) decided that the OFT should have properly investigated this objection, and that making its decision to accept the commitments without consideration of the points raised by Skyscanner and Skoosh was irrational. This was despite the fact that the OFT enjoyed a discretion in resolving a case by commitments, and also despite the fact that Skyscanner and Skoosh did not provide any hard evidence to back up their objections.

The ruling is a particularly bitter one for the OFT. A court would normally be reluctant to intervene in the exercise of an authority’s decision to settle a case, but the CAT clearly felt that it had to do so in this case, on the basis that the OFT had failed to address a compelling objection to the course of action it proposed to take to resolve the case.

The CMA will now be obliged to reconsider the acceptability of the commitments previously accepted. A wider implication of the case may be that the CMA will now, in general, consider more thoroughly third party representations received in Competition Act investigations. This will be advantageous to intervening third parties, but may well lengthen investigation timetables and impose higher effective burdens on investigated parties in persuading the CMA to reject third party objections.

Client Alert 14-251