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Hotel Booking Conspiracy Suit Shut Out in the Cold

DALLAS (CN) - Antitrust claims that hotel chains and online travel agencies conspired to inflate the prices of rooms booked online are unfounded, a federal judge ruled.

The would-be class action accused 12 hotel chains - including Hilton Worldwide and Marriott International - and seven online travel agencies - including Expedia, Orbitz, Priceline and Travelocity - of conspiring to impose "rate parity" in discussions with the trade press, at industry conferences and on conference calls with stock analysts.

It represented a consolidation of several lawsuits accusing the defendants of having entered into horizontal agreements not to compete with each other. Consumers claimed that the hotel operators in particular entered into resale-price-maintenance (RPM) contracts with each online-travel-agency defendant. These agreements allegedly ensured that each online travel agency would not discount below each hotel's own published rate on its website, and that the hotel would provide their lowest online rate in return.

The hotels and online travel agencies allegedly kept the scheme in place by threatening competitors with legal action or refusing to allow them to sell rooms if they did not maintain agreed rates in the RPM scheme.

The online travel agencies then offered near-identical "best price" guarantees, allegedly knowing that the prices were the only ones available even among competitors, according to the complaint.

U.S. District Judge Jane Boyle tossed the multidistrict litigation on Tuesday, concluding that the plaintiffs failed to "plausibly allege a price fixing conspiracy for three antitrust law claims and proximate causation for a state consumer protection law claim."

She said the plaintiffs failed to allege sufficient facts of a price-fixing conspiracy, agreeing with the defendants that the "alleged parallel behavior is simply the result of each defendants' independent effort to protect their business interests by rationally adopting similar vertical distribution agreements."

"Common economic experience" and the complaint itself provided "obvious" explanations as to why the hotels and online travel agencies entered into RPMs, according to the ruling.

"For the hotel defendants, an RPM agreement allowing them to control the prices at which their rooms were sold online made perfect economic sense," Boyle wrote. "As a general matter, it is quite natural for a seller to want to control the online price of its product."

Boyle was also not swayed by the argument that the hotel and online travel agencies' actions went against their business interests.

"Plaintiffs first argue that '[a]bsent the conspiracy, those who would set high prices would be undercut by those who wanted to discount.' Not true," she wrote. "Absent the conspiracy, individual pairs of defendants could unilaterally adopt and enforce the same RPM agreements, preventing any discounting as it relates to the published rates covered in each respective RPM agreement. Next, plaintiffs argue that it would be in the hotel defendants' best interest to compete with the OTAs so that the hotel's website offers the lowest prices, rather than enter into an agreement promising not to undercut the OTAs. But this conclusive assertion is undermined both by common economic experience and facts in the complaint itself."

Regarding the consumer-protection claim, consumers failed to plausibly allege the low-price guarantee had "any discernible effect" on the prices they paid, Boyle found.

"Here, take defendants' rate guarantees away, and each plaintiff would be stuck paying the exact same price, since, as the complaint alleges, room prices were the same across the entire online bookings market," the opinion states. "Moreover, Plaintiffs readily admit that the rate guarantees effectively delivered on their promise (albeit deceptively) of offering the lowest price available online. Thus, while the rate guarantees may be deceptive despite their literal truth, the fact that plaintiffs got what they were promised further shows that the guarantees had no plausible effect on the price at which rooms were sold online."

The plaintiffs have 30 days to seek leave to amend their four claims, Boyle said, "given all the uncertainty fleshed out" in consideration of the defendants' motion for summary judgment.

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