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The OFT has accepted formal commitments from two of the UK's largest online travel agents, Booking.com B.V. (Booking.com) and Expedia Inc (Expedia), together with InterContinental Hotels Group plc (IHG), which will enable online travel agents (OTAs) and hotels to offer discounts on rates for hotel rooms.

The commitments mean that all OTAs and hotels that deal with these three businesses will be able to offer discounts off headline room-only rates so long as customers:

• sign up to the membership scheme of an OTA or hotel to be able to view specific discounts, and 
• make one undiscounted booking with the OTA or hotel in question to be eligible for future discounts.

The discounts offered by OTAs will be funded through their commission or margins.

The OFT's investigation centred on competition concerns that Booking.com and Expedia each entered into separate agreements with IHG which restricted each OTA's ability to discount the rates at which room-only hotel accommodation bookings are offered to consumers.

The commitments address these concerns by allowing greater competition on price between OTAs, and also between OTAs and hotels. They should also enable new online agents to enter the market or expand by offering attractive discounts.

Following acceptance of the commitments, the OFT has now closed its investigation.

Ann Pope, Senior Director in the OFT's Services, Infrastructure and Public Markets Group, said:

'The travel industry, fuelled by the internet, has seen significant changes in recent years, and we want to ensure those changes continue to work in consumers' interests. That is why we are pleased to have secured this outcome which, by allowing OTAs and hotels to offer discounts, should increase competition and mean travellers across Europe can benefit from reductions on hotel accommodation throughout the UK. By shopping around, people can compare the different discounts offered by hotels and OTAs, and ensure they get the best deal.'

NOTES

1. You can see the case closure summary and FAQs for both consumers and businesses on the case webpage. 
2. The commitments have been offered by the following companies:
   - Booking.com B.V. and its ultimate parent company priceline.com Incorporated
   - Expedia, Inc
   - InterContinental Hotels Group plc, and
   - Hotel Inter-Continental London Limited.
3. Room-only hotel accommodation refers to hotel accommodation that is offered on a 'standalone' basis without any other travel components such as flights or car hire. Room-only hotel accommodation does not include hotel accommodation which is offered on an opaque basis (that is, where the identity of the hotel remains undisclosed to the end-user until after the booking is completed). OTAs do not take title or hold inventory to hotel accommodation. 
4. The commitments will remain in force for two years. In the case of their arrangements with each other, the parties will ensure that their existing commercial arrangements comply with the commitments principles without undue delay and in any event within one month. In the case of their arrangements with third parties, the parties will use reasonable endeavours to procure the consent of the counterparty to ensure that their existing commercial arrangements comply with the commitments principles without undue delay and in any event within three months. 
5. The commitments apply to bookings made by residents in the European Economic Area in respect of hotel rooms at hotel properties located in the UK. Unless an OTA or hotel offering a membership scheme unilaterally decides to impose stricter requirements than those set out in the commitments, no membership fee or purchase will be required to join the membership scheme. In order to be eligible for discounts, a customer must join a membership scheme and make one undiscounted booking. 
6. In focusing the investigation on a small number of major companies, the OFT took into account that Expedia and Booking.com are two of the largest OTAs in the UK, each operating on the basis of a different principal business model. IHG is the largest hotel company world-wide, measured by room numbers. 
7. The Competition Act 1998 prohibits, among other matters, agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it (the Chapter I prohibition). Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union, covers, among other matters, equivalent agreements or concerted practices save that the applicable test is in respect of competition and trade between EU Member States.
8. A decision by the OFT accepting binding commitments does not constitute a determination as to the legality or otherwise of the conduct by the parties under investigation either prior to acceptance of the commitments or once the commitments are in place.
9. In April 2014, the Competition and Markets Authority (the CMA) will become the UK's lead competition and consumer body.  The CMA will bring together the existing competition and consumer protection functions of the Office of Fair Trading and the responsibilities of the Competition Commission, as amended by the Enterprise and Regulatory Reform Act 2013.  The CMA, which is a non-Ministerial government department, was established on 1 October 2013 and will be taking on responsibility for cases and market studies from 1 April 2014. See the CMA's homepage for more information.