Duff on Hospitality Law

It’s estimated that room poaching results in upwards of $1.3 billion in lost revenue for hotels and lost funds for consumers every year. As hotels and consumers look for a way to fight against these losses, trademark infringement may be emerging as the most effective tool.

Room poaching occurs when companies position themselves as an event’s housing bureau in order to entice attendees to unwittingly book rooms outside of the official room block. Fake or out-of-block reservations can result in lost reservation fees for hotels, surprise charges and inconvenient and expensive last minute re-booking at alternative hotels for consumers. Further, trademark infringement can erode brand equity and good will between partnering hotels and groups.

Our weekly client OTA & Travel Distribution Update for the week ending April 20, 2018 is below. This week’s Update features a number of stories on the emerging tours and activities space. I also included the first installment of our own detailed look at recent complaints (and now litigation) raised against hoteliers regarding their keyword contracting practices. A huge thanks to my colleague, Don Scaramastra, for digging into this much-publicized anti-trust issue.

Keyword Restrictions:  What Exactly Is the Problem?
("Keyword Restrictions Part I: Restrictions on Keyword Advertising by OTAs: What Exactly Is the Problem?", GSB Client Update, April 20, 2018)
In the first installment of our six-part series critiquing recent articles (and litigation) questioning hoteliers’ keyword practices, my colleague, Don Scaramastra, attempts to define the “problem.” We hope you enjoy.

Australian Authorities Confirm Renewed Interest in Parity Provisions
("Online Booking Clauses Still Cause for Concern for Australian Competition Authority," MLex, April 11, 2018) (subscription required)
Speaking at the ABA’s Antitrust Law 2018 Spring Meeting in Washington D.C. last week, commissioner Roger Featherstone of Australia’s Competition and Consumer Commission (ACCC) confirmed that the regulator is re-examining the previously adopted “narrow” approach to parity in Australia. Featherstone’s comments come only weeks after we first reported that the ACCC was re-considering its previously announced position.

This week’s OTA & Travel Distribution Update for the week ending April 6, 2018 is below. A variety of stories are featured in this week’s Update, including an interesting follow up story on Red Lion’s somewhat unique (and hard to understand) approach to loyalty. I hope you enjoy.

Price-Fixing Fines Imposed Against FlightCentre
("Flight Centre’s $9 million fine renews Australian tensions over court-set antitrust penalties," MLex, April 4, 2018) (subscription required)
Some time ago we featured a series of stories about the somewhat unprecedented approach by the Australian Competition & Consumer Commission (ACCC) to rate parity commitments found in contracts between several international airlines and their distributor, FlightCentre. You might recall that the commitments were found by the ACCC to violate Australian anti-trust laws because the parties were determined to be “competitors” and not principals / agents as argued by the airlines and FlightCentre. This past week, the Australian Federal Court finally concluded the matter by imposing fines of $9.25 million against FlightCentre.

This week’s OTA & Travel Distribution Update for the week ending March 30, 2018 is below. This week’s Update features a heavy dose of OTA updates.

Brazilian Anti-trust Authorities Adopt Narrow Approach to Rate Parity
("Booking Sites Agree To Nix Hotel Pricing Limits In Brazil," Law360 - Technology, March 29, 2018) (subscription required)
Just as we reported last week that Australian competition authorities were re-thinking the previously adopted “narrow” approach to parity, another country signs on to the same approach. Last week, the Brazilian Administrative Council for Economic Defense (CADE) announced that it had reached agreement with Booking.com and Expedia to limit their use of so-called broad rate parity and instead impose only narrow rate parity. According to announcement, the settlement agreement is expected to increase competition in the online travel sector benefitting both hotels and consumer. Someone might want to share with the CADE authorities the results of the investigation conducted last year by the UK’s Competition and Markets Authority (which concluded, among other things, that hoteliers were generally unaware of (or afraid to use) the pricing opportunities afforded under narrow parity) or the basis of the Australian authorities’ conclusion that narrow parity was ineffective in trying to improve competition.

Just when it seemed that service charges were all the rage, tip pooling has reemerged to grab the headlines. Making the rounds from courts to agencies, and now Congress, the issue appears to have been settled by Congress that employers can impose mandatory tip pooling to include certain non-tipped employees.

Can Non-Tipped Employees Participate in the Mandatory Tip Pool?

Under the Fair Labor Standards Act (the “FLSA”), employees who are customarily and regularly tipped can be required to participate in a mandatory tip pool. Under a tip pooling approach, the employer directs tipped employees to combine their tips, and the employer determines a structure for redistributing the tips among the employees in the tip pool. As we have reviewed previously in this blog, employees in tipped positions have challenged mandatory tip pools that include non-tipped employees, such as dishwashers and cooks, asserting that they violate the FLSA. Because those employees are not customarily and regularly tipped, the argument was not without merit as the law has always made clear that tips are the property of the employees to whom customers given them. However, the law also provided that tip pools may be imposed by employers. The FLSA further allowed that employers may claim a tip credit against the federal minimum wage.

Oregon’s legislature has broadened Oregon’s tax on short-term room rentals (also called the transient lodging tax). The new law, Enrolled House Bill (EHB) 4120, expands the scope of persons who must collect and remit the tax and file returns.

Background and Prior Law

EHB 4120 comes after a 2013 change in the law meant to treat third-party intermediaries on par with traditional hotels and motels. Apparently, the legislature now believes the earlier change did not go far enough—so in comes the amendment.

The old law and new law both require intermediaries to collect the tax along with short-term rental providers. But the old law defined intermediaries somewhat narrowly as those who simply facilitate and charge for short-term rental sales. While some intermediaries collected and paid the tax under this framework, that approach was not consistent across the market.

For example, some cities and counties reached voluntary agreements with certain intermediary companies to collect the tax; others had to rely on property owners’ individual compliance. Some intermediary companies took the position that the tax did not apply to them.

Washington lawmakers have decided that all types of lodging in King County should participate in funding the Washington State Convention Center. Since the advent of King County’s convention center tax in 1982, hotels and motels with 60 or more units have had to collect from guests not only the retail sales tax, but also the convention center tax. In Seattle, the convention center tax is 7 percent; in the rest of King County it is 2.8%. As smaller lodging facilities and short-term rentals have increased in popularity, it has become clear that exempting them from the convention center tax has been giving them an unfair basis for competing against larger facilities.

Our weekly OTA & Travel Distribution Update is below. This week’s Update features a number of familiar stories.

Australian Competition Authorities Re-Think “Narrow” Parity
("Narrow and wide parity clauses have same effects, ACCC chief says, amid renewed probe of online travel agents," Add source, March 23, 2018)
In comments at a recent anti-trust conference, Rod Sims, Chair of the Australian Competition and Consumer Commission (ACCC), noted that the widely-accepted “narrow” parity commitments offered by Booking.com and Expedia to resolve the ACCC’s earlier grievances were having the same effect on hoteliers as their broader predecessors. Sims’ comments come as Australian authorities continue their re-examination of the distributors’ practices, which began following the Australian Supreme Court’s ruling that airlines and distributors were competitors (and not principals and agents as claimed). According to Sims, the ACCC was disappointed to learn that hoteliers did not want to take advantage of the offline pricing opportunities afforded hoteliers under the narrow parity compromise.

This week’s abbreviated OTA & Travel Distribution Update is below and features stories on the biggest distribution players – Ctrip, Booking.com, and yes, Airbnb. Enjoy.

Ctrip’s Earnings Slip Following Regulatory Intervention (and that certain daycare video)
("China's Ctrip Blames Scandal, Business Curbs for Sales Shortfall," Bloomberg News, March 15, 2018)
Shares in Ctrip.com International Ltd. fell last week following release of the company’s forecast of 9-11% sales growth instead of the 16% forecasted by analysts. Ctrip’s reported fourth quarter revenues also declined. According to Ctrip, the declines were the result of both (a) regulators banning Ctrip’s automatic (and possibly misleading) bundling of air tickets and travel insurance (something we’ve written about previously) and (b) the now viral video showing daycare workers at a Ctrip employee daycare center abusing the children by, among other things, feeding the children wasabi.