Lawsuit Alleges Price-Fixing By Major Hotel Chains And Online Booking Sites

A class-action lawsuit filed yesterday in a U.S. District Court in California alleges that the biggest names in online travel — Priceline, Expedia, Travelocity, Orbitz, Hotels.com — and some of the world’s largest hotel chains — Hilton, Starwood, Marriott, Intercontinental, among others — conspired together so that the “best price guarantee” you often see when booking a room online is in actuality just a number set by the hotel operators.

The lawsuit [PDF] gets into the various types of arrangements that online travel sites have with hotels, but the complaint boils down to this allegation: Travel websites, in order to claim low-price guarantees, agreed to all set standard minimum pricing for rooms based on rates provided by the hotels; the hotels, in order to keep the revenue from these booking sites, agreed that it would not sell rooms at a rate below what the travel websites are offering.

So if you go to book a room at one of the defendant hotels, the suit claims you’ll likely see the same price listed at all of these sites, and that this number isn’t determined competitively by market pressures, but by the hotel.

Lawyers for the plaintiffs claim to have evidence of written and verbal agreements about such agreements between hotel chains and the websites.

“The large online travel sites, working with hotel chains, have created the illusion that savvy consumers can spend time researching hotel rates online to find good deals,” says one of the lawyers behind the lawsuit, which claims that the defendants violated various federal antitrust laws as well as numerous California statutes. “The reality is that these illegal price-parity agreements mean consumers see nothing but cosmetic differences and the same prices on every site.”

In addition to unspecified damages and legal fees, the suit is looking for an injunction to prevent further price-fixing.

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  1. Loias supports harsher punishments against corporations says:

    Being a cynical person, I’ve sort of assumed there has been some kind of price-fixing going on the whole time. At the very least, the “best price” was never a free-market concoction; someone has always been manipulating it.

  2. That guy. says:

    This make sense to me. I mean, the hotels say “This is how low our rooms can go.” The offer the same low price to all 3rd party reservation companies. That is the lowest price.

    How else did customers think the prices were created? “Wow, we pulled one over on that hotel chain! I’m sure they would NEVER normally let a room go this cheap!”

    • Oh_No84 says:

      This lawsuit is frivolous.
      No one ever thought market forces set the best price.
      Everyone knows that it is set by the hotels and it is just a guarantee that the hotel does not let anyone else have a cheaper price so you dont have to waste time shopping around.

      I dont see how anyone interpreted that any different.

      • YouDidWhatNow? says:

        I see you’ve never met another actual human being. They tend to be ridiculously incapable of rational thought.

  3. Jawaka says:

    I’m surprised that these companies didn’t require that customers give up their rights to a class action lawsuit before using the service. Oh well, live and learn.

  4. dicobalt says:

    They have expensive real estate to maintain just like Best Buy. Anyway who is to say they will stop? They just won’t be coordinating openly.

  5. TheMansfieldMauler says:

    So if you go to book a room at one of the defendant hotels, the suit claims you’ll likely see the same price listed at all of these sites, and that this number isn’t determined competitively by market pressures, but by the hotel.

    Well of course it’s determined by the hotel. Who else would it be determined by? Hotel room prices aren’t advertised as no-reserve auctions.

    When it comes down to it, the hotel determines the prices by market pressures they see, and they know their fixed costs etc. and make a pricing determination.

  6. MBZ321 says:

    I don’t travel very often, or stay at expensive hotels, but who uses those “travel” websites (expedia, etc.).. for booking a simple hotel stay? With all their so-called “service fees”, the price is always higher than booking from the hotel website directly, or calling. The only 3rd party website I used that was somewhat useful was Hotwire.

    • grillin_man says:

      Agreed. The restrictions and fees are the killer. I may use the sites to find hotels where I want to stay and then go direct to the hotel for the reservation…where I can cancel by 6pm on the night of arrival in most instances vs the 24 hour minimum notice through the 3rd party sites.

    • Torgonius wants an edit button says:

      The travel websites give you a decent (but possibly incomplete) idea of the various chains at a location, and what their relative prices are.

      When we booked our vacation in Quebec this summer, we used Travelocity to see what chains were available in the various places we went, and then went to the hotel’s site to book the rooms.

      In a bigger city type area like Montreal, you’ll probably find all the major players, but in a smaller place, like Drummondville, you may only get 1 or 2 options. And the travel sites can also show you hotels that are near your area. It saves time over having to go to each chain’s site and search town by town.

  7. TuxthePenguin says:

    *sigh* I really wish people would understand how these things work before they say there’s some sort of conspiracy.

    I operate a hotel. In order to drive business to my hotel, I might allow various third parties to sell a certain number of rooms. However, I will tell those vendors that they cannot sell the rooms for lower than some price… since I need to break even (now, it might be below cost, but if I know the average guest will also spend $15 on other things and that combined with the room rate will break even, I will go for that).

    There is nothing conspiratorial about that. That’s called business.

    • tlvx says:

      I agree. But, I think what price fixing would indicate, is that all of the hotel chains have colluded to set the floor price, ultimately higher than what the free market would likely force prices down to, had the hotels set their floor prices independent of each other.

  8. Oh_No84 says:

    I thought this is what the best price meant.
    You get the lowest price set by the hotel and the hotel will not let any website offer a lower price so you dont have to shop around because a lower price does not exist.

    I never thought it was based on market forces. Did anyone think that???

    Always book through the hotels website. Never ever book through a 3rd party site.
    Hotels always price match any 3rd party site anyways. Most of the time they automatically have a lower rate. If you book through 3rd party sites you are last on the list to have your requests honored and you are the 1st person they plan to screw over in over bookings.
    I can never understand why people book through these 3rd party sites. I never would.
    All they are useful for is just a search of hotels in an area.

  9. Sarek says:

    Call the “Priceline Legal Negotiator”
    Shatner, enter stage left

  10. AEN says:

    Marriott, whose web site guarantees the “lowest price” never honored Expedia pricing – especially if it was lower.

  11. balthisar says:

    If the hotels conferred with each other then there’s a problem. Otherwise, it’s just like any manufacture setting a MAP — minimum advertised price.

    As for “market pressure,” well, duh. These is the result of market pressure. They didn’t just invent prices that you were forced to pay, but rather prices that you were willing to pay. Just like they’ve always done.

    But here, companies are always evil.

  12. Bubba says:

    This lawsuit should be the hotels suing the travel sites. I own a small fishing charter business in Orlando, my entire business relies on tourism. I sell my charters through my website and with Expedia and their other sites like Hotwire they own. My prices on Expedia has to match my website prices. I actually lose money by using Expedia because of the large percentage they take for selling them, it’s 30%. Those prices are fixed, you must sign a contract with them and the price must be agreed upon by both parties. They also limit the amount of hotels, and activities per city on their sites. There are tons of hotels here, and not all of them are listed. Same with the activities, there is tons of stuff to do and Expedia, Travelocity, Priceline only select a few to sell. Not sure what consumers expect, there has to be fixed prices, a bottom line price. Another fact is that expedia has concierge desks at many of these hotels. They may also sell activities from the desk that arent listed on the website. And since their Turn over rate on concierge personnel is so high, in order to be remembered is to personally meet each employee at every hotel. Thats dozens of hotels and Employees, every hotel, even disney, have dedicated people that visit these concierge desks. They give them a shirt or hat, anything but money so that their always on the concierge people minds. That adds to a companies expenses, so again there has to he a fixed minimum price. That’s how businesses work.

    Another example is groupon, in order to be able to get listed the business must cut their price by 50% and give 25% of that price to groupon. So the business only gets 25% of what they are selling. So on a item that I would sell for $200, I would have to drop that to $100 and only get $50 out of the sell. Impossible for many small businesses. They just do that to hopefully get return business but after getting something so cheap, they won’t come back and pay full price.

    Believe me, consumers aren’t being screwed over by these travel sites.

    • Chris 66 says:

      This was interesting to hear from the perspective of someone that uses these companies to promote business. It’s all just an advertising game isn’t it?

  13. Chris 66 says:

    It all makes sense. Whenever I’ve priced a hotel online they are matching numbers across the board. Then when I’ve called the hotel directly they’ll say “we will match online prices” – well of course they will, it was all agreed upon in the first place! This is wrong on so many levels. I hope this suit forces a change.

  14. Benson55 says:

    It is NOT true that the hotel website posts the lowest rates. They want you to think that but it is not true. Often times the hotel sites are much higher than ALL of the travel sites.

    Many of the large travel sites like Priceline, Expedia, etc will have similar pricing on hotels. However, some of the smaller booking sites can really have great deals that beat these sites. Sites such as hotelopia.com, onhotels.com, and often have big discounts.

    How do you find them? Use a “Travel Search Engine”. Besttravelcoupon.com and Kayak.com are pretty good for comparing rates at the big sites and these smaller sites.

  15. Bort says:

    if collusion is the result of the market operating correctly who are we to argue, why should customers benefit, they are but peons anyways

    • Jimmy37 says:

      NO, that is not how the market is supposed to work; collusion is the opposite of a working market.

  16. Jimmy37 says:

    I always wondered why the prices were so similar. I wouldn’t see more than a buck or two difference.