Duff on Hospitality Law

This week’s Update features a story on an issue – OTA cancellations – that we’ve been hearing a lot about recently. Enjoy.

Further Details Emerge on Japanese Regulators’ Investigation into Rate Parity
("Comment: Booking.com, Expedia and Rakuten in Japanese regulator's sights over price-parity requirements," MLex Insight, April 22, 2019) (subscription required)
In a follow up to a story we featured a few weeks ago, this past week more details (and speculation) emerged about the recent raids by the Japan Fair Trade Commission (JFTC) of Expedia, Booking.com and Rakutan. According to reports, the Japanese investigation is likely to focus on both broad parity (indirect and direct channel parity) and so-called “narrow” parity (direct channel parity only), which was widely used by Expedia and Booking.com as a compromise to satisfy EU regulators’ concerns regarding the OTAs’ rate parity practices several years ago. Japanese regulators have allegedly questioned whether the “narrow” parity compromise truly solves the anti-competitive effects of rate parity. If the results of the JFTC’s investigation into Amazon and its pricing parity practices from several years ago offers any indication as to how this newest investigation might turn out, hoteliers may soon find themselves free of rate parity (indirect and direct) throughout Japan. More to come . . .

(Authors' note: Since the publishing of this post, the legislation outlined below was signed into law by Governor Jay Inslee on May 8, 2019)

On April 17, the Washington Legislature approved sweeping new restrictions on employers’ non-competition agreements with their employees and independent contractors.

The bill, now headed to the Governor’s desk for his expected signature, means that after January 1, 2020, non-competition agreements (see definition and limitations below) will only be enforceable against higher-paid employees and contractors, and generally can last no longer than 18 months.

The law also carries a sting: If a court or arbitrator finds that a covenant violates these new rules, the entity which seeks enforcement of such a provision may be liable for actual or statutory damages and attorneys’ fees and costs.

This week’s Update features a number of stories on important developments in the EU. Enjoy. 

Sabre’s Previously Announced Acquisition Runs Into Regulatory Trouble
("Sabre's Farelogix purchase draws 'killer acquisition' questions from UK watchdog," MLex Insight, April 19, 2019) (subscription required)
Several months ago, we featured a story detailing the evolution of the airline distribution industry and in particular, the growing rivalry between legacy (read: old) global distribution systems (like Sabre) and airlines they serve over airlines’ attempts to bypass the global distribution systems through the use of emerging technologies (like the new distribution capability (NDC) offered through Farelogix). In a somewhat ironic move, Sabre announced plans in November of last year to acquire Farelogix for $360 million. The US Department of Justice and now the UK’s Competition and Markets Authority (and possibly other EU regulators) have begun to ask questions about the proposed deal and its potentially stifling effects on competition within the distribution industry (aka “killer acquisition”). There are many potential lessons to be learned here for the distribution industry generally, which is why we will continue to feature stories updating the status of Sabre’s efforts.

Other than the news that Marriott and Expedia completed negotiations over their new contract (congratulations to Marriott for getting this behind you), this past week was relatively quiet on the distribution front. Enjoy.

Traveloka Challenges OTA Acronym
("Southeast Asia’s Online Travel Agency Traveloka Moves Into Food, Wellness Choices," News, APril 10, 2019)
Indonesia-based Traveloka is challenging what it means to be an online travel agent. The OTA recently added tours and activities to its traditional travel offerings and has begun targeting users in its domestic markets through the addition of lifestyle products (e.g., food, beauty, movies). In Indonesia, where Traveloka’s “discovery” platform was first introduced, users can purchase discounted restaurant vouchers, read reviews of local restaurants, and book a wide range of lifestyle products and services offered by many of the country’s traditional retailers.  Content for the platform is sourced directly from suppliers and vendors or indirectly through other third-party channels. Traveloka plans to roll out its discovery platform to other Southeast Asian countries, including Australia. If attempts by Traveloka (and AirAsia) to diversity their user base through the addition of lifestyle products and services proves successful, how long will it be before the more traditional global distributors follow their lead?

Expedia Unable to Stop Withholding of Critical Airline Data
("U.S. judge rules against Expedia in United Airlines fare listings lawsuit," Reuter US News, April 5, 2019)
In the continuing saga of United Airline versus Expedia, a federal judge in NYC ruled last week that Expedia was not entitled to a court order prohibiting the airline for cutting off access to critical fare and schedule data following the September 30 contract termination. According to the court, while Expedia was able to demonstrate a “likelihood of success” on the merits of its breach of contract claim, it was not able to satisfy the requirements needed for an immediate injunction. More to come...

This past week was relatively quiet on the distribution front. Have a great week everyone.

Online Travel Agencies Drawn into Indonesian Antitrust Probe
MLex Insight on Mar 26, 2019
Indonesian online travel agencies have now been drawn into a widening probe into various allegations of anticompetitive behavior in the country’s aviation industry.

This week’s Update includes status reports on several ongoing distribution-related court cases involving both hoteliers and distributors.

Conspiracy Theorists Live Another Day
("Lawsuit on hotels' internet advertising tactics moves forward," Reuters Company News on Mar 21, 2019)
Federal District Judge Rebecca Pallmeyer refused last week to toss out claims against several major hotel brands over their alleged conspiracy not to compete online. If you recall, the case centers around plaintiff’s claim that the major hotel brands agreed not to bid on each other’s keyword search terms (which ultimately resulted in higher room rates). The court’s ruling at this very early stage in the case by no means suggests that the plaintiff’s claims have merit. Instead, the court’s decision means (in the words of the court) that the brands had an “opportunity” to compete unfairly. Those interested in a detailed discussion of the plaintiff’s claims and the court’s initial (somewhat skeptical) review of those claims should take a look at the attached court order.

U.S. Circuit Court Deals a Blow to Short-Term Platforms
("Airbnb Loses Major Fight Over California City's Rental Law," Bloomberg Quint - Stories, March 13, 2019)
In somewhat of a surprise ruling issued last week, the U.S. Ninth Circuit Court of Appeals refused to strike down a Santa Monica city ordinance holding short-term rental platforms (Airbnb and Homeaway) legally liable for vacation rentals violating the City’s short-term rental ordinance. In reaching its decision, the Court rejected arguments by the platforms that the ordinance violated both the US Communications Decency Act of 1996 (which shields online services from liability for the content posted by third-party users on their websites) and the platforms’ constitutionally protected rights of free speech. The Ninth Circuit Court’s decision is consistent with other lower court decisions in Los Angeles and San Francisco, but runs counter to a separate Los Angeles lower court decision. While a decision by the Ninth Circuit obviously provides stronger precedential value for courts considering similar local laws and regulations in the future, it remains to be seen whether cities seeking to curb the growth of short-term rentals will seek to leverage this decision to more aggressively pursue the platforms facilitating the bookings as opposed to the hosts themselves.

This week’s Update includes a heavy dose of TripAdvisor updates. Once the dust settles a bit on this past week’s big news – the announced acquisition of Hotel Tonight by Airbnb – we’ll update everyone on the acquisition and its anticipated effects. Is it a game changer? I don’t think so. Does the acquisition expedite the inevitable standardization of products and services across all the major online travel distribution platforms, definitely. In the meantime, enjoy this week’s Update everyone.

Sales Principles Introduced for Online Booking Sites in the UK
("Hotel Booking Sites Get Consumer-law Compliance Principles from CMA," MLex, March 1, 2019) (subscription required)
By September 1, 2019, hotel booking sites operating in the UK must implement mandatory “sales principles” released last week by the UK Competition and Markets Authority (CMA). The release of principles follows the CMA’s months-long investigation into the sales practices of certain online booking sites and the sites’ recent agreement to improve transparency on the sites to avoid further regulatory scrutiny. The principles, which apply not only to OTAs and search engines, but also to hoteliers’ own booking sites, cover sort order, reference prices (e.g., “discount” or strikethrough pricing), hidden charges and pressure selling. According to the CMA, sites that fail to implement the principles by the September 1, 2019 date may be subject to further enforcement action.