Starwood, Expedia Win Dismissal of Room Price-Fixing Suit

Starwood Hotels & Resorts Worldwide Inc. (HOT) and Expedia Inc. (EXPE) among other hotel and Internet travel agencies won dismissal of an antitrust lawsuit after a judge found consumers hadn’t showed the companies conspired to fix room prices.

“The well-pled facts do not plausibly suggest that defendants entered into an industrywide conspiracy,” U.S. District Judge Jane J. Boyle in Dallas said yesterday in a ruling throwing out the case.

The plaintiffs, who bought hotel rooms across the U.S., claimed in more than two dozen consolidated cases that the companies agreed to prevent consumers from getting lower prices. The companies denied any attempt to fix prices.

The hotels and travel companies were accused in the lawsuit of entering agreements to prevent hotels from selling rooms for less than the participating travel agents charged, causing consumers to pay “artificially inflated prices,” according to a May 1 complaint.

“The defendants’ ‘best price’ or ‘best rate’ guarantees are nothing more than a cover for their conspiracy to fix prices,” according to the complaint.

Boyle said she would allow the consumers to re-file the complaint if they tell her within 30 days how their proposed revision would remedy the shortcomings in the one she threw out and she agrees with them.

Genuine Competition

In her ruling, Boyle rejected the plaintiffs’ three antitrust claims and a consumer protection claim. She found they didn’t adequately allege that a price-fixing conspiracy began in about 2003. The judge also said the consumers failed to adequately allege there were agreements that online travel agencies wouldn’t genuinely compete with one another and that individual hotel chains would publish the best-available room rates and that no online travel agency would be allowed to offer that room for less than any other or the chain itself.

Those business practices were the result of independent efforts by the online travel companies to protect their interests by adopting similar “vertical distribution agreements” with the hotel chains, according to the ruling. Boyle said she agreed with the companies’s explanation that the allegations amounted to “nothing more than parallel business activity.”

Single Suit

The lawsuits, dating back to 2012, were later combined in a multidistrict litigation in which the plaintiffs sought to turn the consolidated cases into a single lawsuit on behalf of all consumers who paid for hotel rooms reserved through the defendants’ websites from Jan. 1, 2003, to May 1, 2013.

The class of transactions wouldn’t include reservations made as a part of a package deal, or where the name of the hotel wasn’t disclosed until after the reservation was paid for.

The defendants said the consumers’ allegations didn’t meet the standards for lawsuits claiming antitrust violations.

“There is nothing anticompetitive, much less unlawful, about a hotel setting specific pricing terms for its distributors so that it competes effectively with other hotels,” they said in their July 1 motion to dismiss the lawsuit. “Plaintiffs assert the novel proposition that a hotel must compete against itself.”

The online travel site defendants included Expedia, Hotels.com LP, Travelocity.com LP, Booking.com BV, Priceline.com Inc. (PCLN) and Orbitz Worldwide Inc. (OWW) The hotel defendants included Starwood, Intercontinental, Marriott International (MAR) Inc., Trump International Hotels Management LLC and Hilton Worldwide (HLT) Inc.

‘Interbrand Competition’

“The hotels can control the price of the rooms they offer,” Thomas Barnett, an attorney for the travel sites, said at a Dec. 17 hearing. “As long as there is interbrand competition going on, consumers don’t have to worry,” he said, referring to competition among hotels within a city or area.

The agreements with online travel sites allowed hotels to advertise the same price for rooms across multiple outlets, said Jeffrey Cashdan, representing Intercontinental Hotels Group Resources Inc., whose affiliates include Holiday Inns and InterContinental Hotels. (IHG) “To call that price-fixing is absurd,” he said at the December hearing.

The case is In re On-Line Travel Company (OTC)/Hotel Booking Antitrust Litigation, 12-cv-3515-B, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporters on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net; Tom Korosec in Dallas at tkorosec@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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