Well done, CMA – but two more things…
by David Weston
Chairman of the Bed & Breakfast Association
As regular readers of this column will know, the B&B Association complained way back in July 2017 to the competition watchdog (the CMA) about various aspects of the way giant online travel agencies (OTAs) treat consumers and B&Bs. Our complaints were:
1) Against “rate parity” (narrow MFN) clauses
2) Against false discounts created by OTAs to mislead consumers
3) Against false availability statements created by OTAs to mislead consumers
4) Against misleading, non-transparent and manipulated default search rankings by OTAs, and
5) Against forced (non-optional contract term) bidding by OTAs on hotel & B&B names with search engines
So we were delighted on 6th February this year that the CMA finally followed its detailed investigation (started the month after our meeting with them in September 2017) with action to stop some of the egregious practices we highlighted, and protect consumers from abuse by OTAs. These online giants have grown to dominate our industry in recent years, partly (as the CMA’s action shows) by misleading and unfair practices at the expense of consumers and small businesses like B&Bs.
The CMA’s recent action was on our complaints 2), 3), and 4); we are still pressing for action on restrictive “rate parity” clauses (complaint 1), and on forced bidding by OTAs on B&Bs’ names on search engines without express permission – what one of our members called “brandjacking” (complaint 5).
The “rate parity” clauses (in competition law jargon, “narrow MFNs”) are put by OTAs into their contracts with B&Bs and hotels, to prevent the accommodation owners from discounting their own prices to their own customers on their own websites. The OTAs demand a certain commission level (typically between 15% and 25%), and insist that the B&B or hotel must charge the full commission-inclusive price to customers on the B&Bs or hotel’s own website too, even when no commission is payable – for example, when a guest is booking a B&B direct from the B&B’s own website.
The CMA recognises that such “rate parity” clauses are a restrictive practice, alien to most of today’s commercial world. “Retail price maintenance” was outlawed in Britain in 1964 for being against the public interest.
Yet so far, the CMA has accepted the OTAs’ “free riding” argument as justification for their restrictive practice. OTAs have argued that the millions they spend on websites, apps, brands and advertising might not be viable if the accommodation owners were allowed to undercut the gross prices that include their hefty mark-ups to pay for their (the OTAs’) marketing investment. That would, they say, be “free riding”. They insist they must be allowed to keep prices high online.
We now repeat our call to the CMA to finally reject the OTAs’ blatantly self-serving “free riding” argument, and ban the “rate parity” clauses they impose.
We also press for them to ban bidding by OTAs on hotel & B&B names with search engines without express permission from the accommodation owner (i.e. not forced as part of an unfair set of T&Cs).
What have giant global corporations to fear from tiny B&Bs freely setting their own prices to their own customers? Why do the online giants need to restrict small family businesses, and keep prices high for consumers? Why should OTAs be allowed to hijack your business’s brand name and so take over the top place on every online search for your property?
Let’s have free and fair competition. Good work so far, CMA; just two more abuses to stop!
The Bed & Breakfast Association is the UK trade association for B&B, guest house and independent hotel owners, and exists to inform, support & represent owners. Membership costs £60 a year. The Association is a non-profit organization with no shareholders, dedicated solely to the interests of its members.
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