Kassie Smith QC wins hotel online booking CAT appeal for Skyscanner

26 Sep 2014 | by Caroline Sweeney

The Competition Appeal Tribunal gave judgment today in Skyscanner’s appeal against the decision by the OFT (now the CMA) to accept commitments from a number of online travel agents (OTAs) and InterContinental Hotels Group plc (IHG).  This was the first time that the Tribunal has been called upon to consider a commitments decision taken under s.31A of the Competition Act 1998.

By the commitments at issue in the case, the OTAs (Expedia and Booking.com) and IHG agreed to allow limited price discounting of online hotel room rates.  Discounting was to be allowed only to members of Closed Groups after one initial full-price purchase.  Further, although OTAs and hotels could advertise the general availability of discounts, the actual level of those discounts was not to be disclosed either on the hotel’s/OTAs’ own websites or via price comparison websites or meta-search sites.  The commitments were expressed to be minimum standards.

Skyscanner operates a price comparison or meta-search site for flights, hotel rooms and car hire.  Meta search sites display prices offered by third parties and thereby assist consumers to compare pricing.  After searching for a hotel room, for example, on Skyscanner’s site, consumers are directed to third party websites for the booking to take place.  Skyscanner was concerned that the commitments offered by the OTAs and IHG would prevent it from showing the actual prices available for hotel rooms to visitors to its site.  This would have a negative impact on price transparency and on inter-brand competition.  Skyscanner took part in the OFT’s consultation and made these points to the OFT.   However, the OFT proceeded to accept the proposed commitments by its decision of 31 January 2014.

Skyscanner appealed to the Tribunal under s.47(1)(c) of the Act.  The appeal was therefore to be determined by applying the same principles as would be applied by a court on an application for judicial review.  Skyscanner appealed on three grounds.  The Tribunal upheld Skyscanner’s appeal on two of those grounds and therefore quashed the OFT’s decision.

First, the Tribunal held that the OFT failed properly or conscientiously to take into account Skyscanner’s  objection to the proposed commitments.  The Tribunal held that the OFT failed properly to investigate a plausible point and instead insisted on Skyscanner providing more evidence or supporting material.  The Tribunal held that “if a consultation response raises an important and obvious point of principle, it is for the authority to examine it further.  This is particularly so where the authority has not carried out an analysis of the economic effects of the practices which it proposes to address with its commitments decision and where that decision itself may generate its own economic effects in the market”.  The Tribunal held that the OFT had acted unfairly and that the process by which it reached its decision was procedurally improper.

Second, the Tribunal held that the OFT had acted irrationally in coming to a decision that effectively ignored the point that Skyscanner and others had raised in relation to the potential impact of the commitments on meta-search and on price transparency and competition more generally.  The Tribunal held that “[w]hilst the authority enjoys a substantial margin of appreciation in exercising its judgement, where it makes a decision that raises obvious competition concerns that have on its own admission not been fully addressed, the Tribunal can and should intervene”.  The OFT had “acted as no reasonable authority should act”.

The Tribunal quashed the OFT’s decision and remitted it to the CMA with a direction to reconsider the matter in accordance with its judgment.

Kassie Smith QC acted for Skyscanner

Tim Ward QC acted for IHG

Josh Holmes acted for Expedia

Alistair Lindsay acted for Booking.com

Please click here to read the full Skyscanner Judgment