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OFT inquiry means a nervous wait for hotel companies

24 September 2010 by

The Office of Fair Trading (OFT) has been reasserting itself gradually as a champion of consumers' rights and an enemy of vested interests.

Traditionally seen as a bit of a toothless tiger, its chief executive John Fingleton has steered the government watchdog through a series of high-profile cases against construction firms, banks and retailers since he took over in 2005. So the news that the OFT is going investigate potential breaches of competition law in the world of online hotel sales (page 6), following a complaint by online room retailer Skoosh.com, is interesting and probably not a little bit disquieting for one or two hoteliers.

Investigations are at an early stage but the OFT is thought to be looking at whether the practice employed by some hoteliers of enforcing "rate parity" amounts to price fixing. Rate parity involves hotel companies ensuring that third party agents don't charge a customer any less for a room than the price they would pay if they went to the hotel direct.

Peter Hancock, for one, argues that enforcing rate parity is perfectly sensible (page 18) - why reward your customer for going elsewhere, especially when you then pay commission to that third party for the privilege?

In any case, even if one hotel decides it wants to charge a certain amount for its rooms, that doesn't stop its local competitor undercutting its rival if it wants to.

If hotels aren't colluding to set a minimum room rate for all the hotels in their area but are simply attempting to govern the price of their own rooms, how can that constitute price fixing? With any luck, it won't.

But how the OFT - an organisation renowned for holding its cards remarkably close to its chest - views things is another matter. Watch this space.

Neil Gerrard, Pubs and Bars Editor, Caterer and Hotelkeeper

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