22 March 2019

No upgrade for major hotel chains

Lawsuit against major hotels on anti-competitive internet advertising to move forward, echoes 1-800 Contacts FTC complaint.

A US federal judge turned down a request by a group of major hotel chains to throw out a class-action suit accusing them of conspiring non-compete online. The chains included Hyatt Hotels, IHG, Marriott International and Wyndham.

Opportunity to conspire

A group of hotel customers filed a case last ear alleging the chains agreed not to advertise against one another on online travel agencies and stopped advertising against one another in search results. The lawsuit says the changes followed a 2014 hotel industry conference. Judge Rebecca Pallmeyer of the US District Court for the Northern District of Illinois agreed for the lawsuit to go forward, writing ‘these allegations show, at best, that defendants had an opportunity to conspire; they do not support an inference that a conspiracy occurred.’ The hotel chains argued Karen Tichy, the named plaintiff, was not harmed by the alleged conspiracy. They also cited instances where searches for one hotel prompt advertisements for another chain, indicating there is online competition.

Dial 1-800

The lawsuit echoes an administrative complaint filed by the  Federal Trade Commission (FTC), originating in 2016, charging that 1-800 Contacts, the largest online retailer of contact lenses in the United States, unlawfully orchestrated a web of anticompetitive agreements with rival online contact lens sellers suppressing competition in certain online search advertising auctions and restricting truthful and non-misleading internet advertising to consumers. According to the administrative complaint, 1-800 Contacts entered into bidding agreements with at least 14 competing online contact lens retailers that eliminate competition in auctions to place advertisements on the search results page generated by online search engines such as Google and Bing. The complaint alleges that these bidding agreements unreasonably restrain price competition in internet search auctions, and restrict truthful and non-misleading advertising to consumers, constituting an unfair method of competition in violation of federal law.