Duff on Hospitality Law

The week’s Update features an update on one of the many pending EU and EU member states’ ongoing investigations into the practices of OTAs. Enjoy.

Danish Competition Authorities Weigh In
("Hotel-booking competition improving but users must be better-informed, Danish report says," MLex, February 1, 2019) (subscription required)
In a report released last week by the Danish competition authority, the regulator concluded that although competition among bookings channels has improved (allegedly as a result of the rate parity improvements associated with “narrow parity”), much education is still needed. According to the regulator, both consumers and smaller hotel companies need a far better understanding of OTAs’ revised terms and conditions and their effects.  Going forward, the regulator will now focus on better educating hotel companies of the revised terms and conditions and informing consumers of OTAs’ standard sales practices (e.g., limited room availability). Separately, the Danish government has committed to working with the EU to require OTAs to better inform consumers of the OTAs’ preferential sort order and display practices.

This week’s Update features a heavy dose of Airbnb as it celebrates a milestone. Enjoy.

Lufthansa Partners with AI-Powered Predictive Platform
("Lufthansa invests alongside Hopper, plotting collaboration on artificial intelligence-led tools," Phocuswright, January 23, 2019)
The Canadian company, Hopper, has the been the subject of several previous Updates. The application-based booking platform, which uses predictive analytics to forecast airfares and room rates, announced last week a “multi-million dollar” partnership with European airline, Lufthansa. According to the two new partners, the benefits of the newly announced partnership include giving Lufthansa access to Hopper’s AI to identify traveler preferences and predict demand and providing Hopper a much needed entrance to the European market.

This week’s Update features two interesting stories on distribution in the airline and cruise industries, which caused us to question what, if any, lessons can be drawn for those in the lodging industry. Enjoy.

Air Carriers Accused of Abusing Dominant Position in Online Travel
("Big airlines' should draw EU antitrust action over price transparency, passengers' lobby says, MLex, January 17, 2019) (subscription required)
Wait. What? Really? When have we ever seen a headline like this in online travel? Much publicized attempts by airlines to offer passengers who book direct the option of creating custom travel packages (via a menu of ancillary services offered) are now getting the attention of travel-user groups across the EU, including the European Passengers’ Federation (EPF). This past week, the EPF complained to the European Commission that airlines’ transition from traditional distribution channels (i.e., GDS) to direct channels is making it increasingly difficult for passengers to compare offerings (in the manner that standardized (i.e., old) GDS distribution channels might allow) and violates (if not the language, at least the intent and purpose) the EU law governing computerized reservation systems. According to the EPF, airlines’ use of their direct and customized booking channels has made it increasingly difficult for users to identify other available modes of transportation (e.g., rail or bus) and to appreciate the differences among the airlines’ various ancillary products and services. This latest complaint comes on the heels of complaints raised last December by the European Technology Travel Services Association (ETTSA) that Lufthansa’s refusal to offer intermediaries its lowest fares evidence Lufthansa’s dominant market position and discriminatory behavior. Lobbyist for the GDS providers are definitely working overtime these days...

Voice-assisted devices (a/k/a smart speakers) feature prominently in this week’s Update. Enjoy.

New Platforms Brought to Regulators’ Attention
("Smart speakers, publishing platforms and connected cars prompt antitrust concerns," MLex, January 8, 2019) (subscription required)
Given the lessons learned years ago when Microsoft’s operating system (allegedly) ruled the desktop world, it wasn’t surprising to see reports this past week that European competition experts have alerted the European Commission of the potential gatekeeping power of voice-assisted devices (e.g., Alexa, Siri, etc.). According to these experts, as adoption of these popular devices grows, so does the potential for abusive (i.e. exclusionary) behavior. Hoteliers at times have raised similar concerns with the growing use of these popular devices. Unlike desktop or mobile search applications, which return multiple responses to users’ queries, these devices typically return only one response. If, for example, an online travel agent or particular hotel company was able to strike an exclusive relationship with these platforms (and therefore become the sole supplier of travel products and services), it could effectively shut out other distributors or hoteliers from this increasingly important point of sale.

Mistakenly Discounted Rates a Regular Occurrence
("$16,000 first class seats sold for $675. Errors like these are more common than you’d think," Vox, January 4, 2019)
Details emerged this past week about Cathay Pacific’s unprecedented discounting of first class and business class tickets on certain flights. In some instances, the discounted tickets reflected over a 95% discount off the normal fare. As suspected by many (including those who report on such discounts), the discounts were not intentional and were instead the result of a technical glitch in Cathay Pacific’s systems. Whether for legal reasons or reputational concerns, Cathay Pacific chose to honor the discounted fares for those customer who purchased tickets before the glitch was discovered. From our own experience (and as confirmed in the article below), these mistaken fares (and hotel room rates) are somewhat of a regular occurrence. While there are things an airline or hotel company can do in advance to help avoid the need to honor these mistaken fares and rates, the potential reputational harm (particular in this age of travel blogs) often demands that companies honor the mistaken fares and rates.

Despite a Change in Name and Business Model, Priceline is Back
("Remember Priceline? After a Comeback and a Name Change, It’s Betting Big on China," Wall Street Journal - Business, December 28, 2018)
Booking Holdings Inc. (fka Priceline.com) is back. The attached Wall Street Journal story provides a great overview of Booking Holdings’ rise from the 2001 dot-com ashes as its market value grew from less than $200M to greater than $100B (earlier this year). From all appearances, Booking Holdings is now betting its future on Chinese travelers and the many travel technology companies that cater to them.

Both regulatory investigations and consumer complaints feature prominently in this week’s distribution news.

Booking.com Weighs In On the Need for Further EU Regulation
("Big tech firms push back against possible EU antitrust reforms," MLex, December 14, 2018) (subscription required)
Along with other technology giants, Microsoft, Google, Facebook and Spotify, Booking.com submitted last week its response to an European Commission consultation seeking feedback on whether current EU competition rules needed updating to deal with the evolving digital economy. Not surprising, the technology platforms were unanimously opposed to any updates to existing competition rules, arguing that the digital sector remains highly competitive and subjective to disruption. Booking.com, however, in a break from the others, argued in favor of strengthening the Commissions’ competition enforcement resources, in part, to avoid the patchwork of investigations and enforcement actions Booking.com has faced from individual EU member states.

This week’s Update features a variety of stories on traditional GDS, metasearch and wholesale channels. Enjoy.

Global Distribution Systems Noted by Appeals Court As Being “Rather Backwards"
("Sabre urges appeals court to scrap jury verdict in dispute with US Airways," MLex, December 14, 2018) (subscription required)
The US Court of Appeals for the Second Circuit heard arguments last week on Sabre’s attempt to overturn a jury’s finding that Sabre’s contracts with US Air were anti-competitive. According to Sabre, the disputed “full content” provisions found in its airline contracts are similar to the recently upheld provisions found in American Express’ merchant agreements under which merchants are prohibited from directing transactions away from American Express. According to the US Supreme Court, American Express’ agreements were permissible, in part, because American Express operates a “two-sided” platform (a platform where through incentives and other benefits merchants and card holders are brought together). In its appeal, Sabre argued that it too operates a two-sided platform (airlines and travel agents), an argument that had been previously rejected at the trial court level. In comments during the appeal’s proceeding, the Circuit Judges expressed doubts over Sabre’s arguments stating that the GDS’ technology was outdated and that the industry’s three remaining participants were “rather backwards.”

Is it just my generally biased view of online travel platforms or are regulators finally taking a hard look at the sometimes questionable practices of these channels? Enjoy.

French Authorities to Examine Travel Platforms’ Pricing Practices
("Hotel platforms may face French antitrust probe for excessive pricing, de Silva says," MLex, December 5, 2018) (subscription required)
In a statement last week, the head of the French Competition Authority announced that online travel platforms operating in France, like Booking.com, could soon face antitrust scrutiny over the allegedly excessive prices charged hotels for displaying their rooms. While these types of cases are relatively rare, there has been a recent revival of excessive pricing investigations in several European Union countries. Should this investigation go forward, it will be interesting to note whether the French Competition Authority believes that Booking.com (or other online platforms) enjoys such market dominance that it is able to demand excessive prices.

Following last week’s holiday break, we are once again sharing each week what we feel are the most noteworthy stories in the distribution, loyalty program and (occasionally) short-term rental fields/industries. We hope you enjoy.

Global Distribution Systems Become Latest EU Target
("European Commission Is Probing Travel Distribution Systems for Anticompetitive Practices," Skift Travel News, November 25, 2018)
While we routinely feature stories detailing competition authorities’ pursuits of the major online distributors, it is rare for those same authorities to announce an investigation or enforcement effort directed against the legacy global distribution systems. This past holiday week, however, the European Commission announced investigations of both Amadeus and Sabre over their possibly anti-competitive contracts with airlines and travel agents. According to the Commission’s announcement, it was looking into whether the GDS’s “full content” contract clauses illegally prohibited airlines and travel agents from distributing and/or sourcing tickets through alternative channels. Those familiar with the issue will recall the number of lawsuits in recent years between airlines and the GDSs over airlines’ desire to distribute inventory through alternative channels.