Pretty Interesting Legal Dispute Sheds Light on Inner Workings of Online Booking Sites
Sticky legal situations overseas for U.S.-based online booking sites such as Expedia, Priceline, and Booking.com are nothing new. In 2011, Expedia was fined for advertising false prices in Europe, and in 2012, U.K. regulators accused the sites of price fixing and anti-competitive practices.
The latter of those lawsuits was thrown out earlier this year, but foreign entities aren't giving up on enforcing its national laws on digital businesses based overseas. This week, the French government sued Booking.com, claiming that its contracts with properties "prohibit hotels from offering prices for rooms at a price lower than those displayed on Booking.com’s website," once again raising issues of anti-competitive behavior.
The problem with the practice is that the contracts take the power away from the hotel in terms of its ability to set prices and offer deals through its own website. In other words, if you want to do business with any of the online booking companies, you forgo your freedom to offer lower prices to other market segments via other channels, including your own reservation department.
The easy solution for hotels looking to stay flexible would be to not do business with such sites, but in today's world where the majority of bookings occur online, that's easier said than done, especially for foreign hotels looking to reach the U.S. market. The tough-love rules, both with the hotels themselves and with other booking sites, allow a site like Booking.com to confidently (and legally) advertise that it is offering the lowest rate. And because of the sites' popularity, they are able to make the hotels play by their rules.
Whether those practices are legal continues to be an on-going debate, and it looks like we're set for another round as France pushes back. We thought the big picture was interesting, something worth understanding as we all no doubt have used one of the booking sites at one time or another. The result of the lawsuit will have a huge impact on the future reliability of booking sites. If hotels are not bound to give them the lowest prices, the whole concept of the discount booking site more or less goes out the window.