Hotels could be breaking competition law

25 October 2007 by
Hotels could be breaking competition law

Many hotels are unwittingly running the risk of breaching EU competition law by signing "no-undercutting" agreements with third parties selling their rooms, experts have warned.

The European Tour Operators Association (ETOA) said hotels often seek to ensure the prices they publish on their websites are not undercut by tour operators, which have paid for the right to sell rooms.

While these agreements are generally made in good faith, they risk entering into price-fixing territory, according to Tom Jenkins, executive director of the ETOA.

"Hotels have naturally assumed they have an absolute right to determine the price paid by the consumer. This right is not absolute but subject, like all things, to competition," he told Caterer. "Hoteliers who insist on a guarantee that the price the operator sells to the public doesn't differ from their own advertised price are effectively breaking the law - and the penalties can be severe."

Anti-competitive agreements between businesses are illegal under chapters I and II of the Competition Act 1998. Companies found guilty of anti-competitive behaviour can face hefty fines of up to 10% of their worldwide turnover.

However, the law doesn't affect agents acting on behalf of hoteliers, Jenkins added. "If you have an agency agreement in place it's fine for the hotel to set the price because the agent is selling that product on behalf of the hotel," he said.

Jenkins was speaking ahead of the Global European Marketplace conference, which takes place on 9 November at Earls Court in London.

Read more on competition laws here >>

By Dee Rossi

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