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Are OTA rate-parity clauses legal? ACCC begins probe

September 17, 2018 Headline News 3 Comments Email Email

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC) is investigating whether “parity clause” contract provisions imposed by online travel agents (OTAs) on Australian hotels and motels are still legal.

ACCC chairman Rod Sims told ABC News that recent changes to Australian competition law might affect the right of OTAs to contractually ban local hotels and motels from advertising a cheaper price on their own websites than the price offered on the sites operated by the OTAs.

The two biggest OTAs are industry giants Expedia and Booking Holdings, which each own numerous sub-brands.

Rate parity clauses contractually guarantee that accommodation providers will not undercut prices advertised OTA sites, despite operators paying the OTAs fees calculated at a fixed percentage of every booking made through the OTA platform.

Sweden recently followed Belgium, France, Italy, Austria and Germany in moving to ban parity clauses. Australian hoteliers want the same in Australia.

The Accommodation Association of Australia (AAoA) says flatly: “Room-rate price parity clauses should be banned in Australia immediately”.

“As things stand, for consumers to maximise their chances of paying the lowest possible room-rates in Australian accommodation businesses, they should contact the accommodation business direct or try a bricks and mortar accredited Australian travel agency,” AAoA chief executive Richard Munro stated.

Munro said the AAoA would “continue to push for major reforms to online travel agencies in 2018 which rein in their free-riding on Australia’s accommodation and tourism industries”.

Aussie outback pub hospitality. The York Hotel on Hannan Street, Kalgoorlie, WA

 

Australian entrepreneur Dick Smith recently joined the fight on the side of small hotels and motels battling big US-based OTAs. See: Dick Smith backs agents – declares war on OTAs

In his video, Smith said the ACCC had allowed OTA contracts to prohibit family motel websites from advertising cheaper prices than those displayed on the OTA sites.

“Now how can that be in the consumer interest?” Smith asked incredulously. “It just shows you the power of these multinationals. It’s outrageous.”

Now the ACCC is having another look at it.

“We’re looking again at whether we’ve got the ability to force more change,” Sims told the ABC.

“We’re looking at that extremely closely because we think there’s a chance that the arrangements they’re continuing to use might be illegal in further ways.

“So we’re looking to see whether we can use the law to allow hotels and motels to put a different price on their own website.”

The ACCC looked at the issue previously to ensure hotels and motels could offer different prices to people who phoned them directly or walked through the door. But stipulations in contracts with OTAs can still ban small operators from matching or beating on their own websites the prices displayed on the OTA websites.

From 1 September 2016, Expedia (which includes Wotif.com) and Booking.com undertook to the ACCC to remove contractual requirements for Australian accommodation providers to:

  • offer room rates that are equal to or lower than those offered on any other online travel agent
  • offer room rates that are equal to or lower than those offered on an accommodation provider’s offline channels
  • make all remaining room inventory available
  • offer the same number and same type of rooms offered to any other online travel agent.

The ACCC statement on that can be viewed here.

It may now be time for the ACCC to go further.

Written by Peter Needham

Currently there are "3 comments" on this Article:

  1. bruce weston says:

    There is a lot of hysteria around this subject – I am a small family motel and at first I was totally outraged at the intrusion of these blood suckers in my affairs — 5 years later I am of the opposite opinion they provide a very slick and simple way of booking with you , done I note many times , late a night , – I wake up in the morning and ‘bingo’ bookings are there I have done nothing – sure it has cost me 12% [you only pay more if you participate in their special promotions ] but as against talking to a customer for 20 mins who ring , wants , and gets a cheaper price , what has it achieved for me the accommodation owner – NOTHING I have discounted to the same or less net figure and so MY return is no different SO WHAT IS ALL THE BAA HAH ABOUT – i still get the same and for a lot less work . I used to be part of a chain and find that after not paying their fee and the mandatory loyalty discount I am far better off financially

  2. I find it incomprehensible that a 3rd party OTA can dictate to a owner of a property what price they can charge. It should be the other way around.

    The OTA websites are renowned for bait and switch tactics–I have seen it on my own property and my staff spend hours explaining to customers that the prices they see on those websites is not the final price they will be charged. That should be illegal.

  3. bruce weston says:

    Robert Reynolds – you have me confused . You sign an agreement for an OTA to be your selling AGENT and they provide you with an advertising platform within their structure for a commission on actual sales provided . This platform contains info about your place and your pricing ALL PROVIDED BY YOU – they don’t make it up . This platform allows you at any time to log in and alter , re-price , cancel any room you like . YOU do that ! no one else . There is no made up pricing BUT one OTA has a nasty habit of converting your price to US dollars on one of its subsidiary sites to make it appear they are ‘cheaper ‘ but it is clearly marked US dollars and is really still only your rate in AUS dollars when collecting from the customer – annoying , yes illegal no just be aware of it trust me the customer knows and just hoping to bluff you – bet the OTA will charge their commission on the higher Aus. dollar amount

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