Antitrust Law Daily Wrap Up, TOP STORY—N.D. Tex.: Consumers fail to allege conspiracy in the online hotel bookings market, (Feb 19, 2014)

By Jeffrey May, J.D.

The federal district court in Dallas has dismissed an antitrust action filed by consumers who claimed that they paid inflated prices on hotel rooms booked online. The consumers failed to adequately allege an industry-wide conspiracy to impose rate parity in the online hotel bookings market (In re: Online Travel Company (OTC) Hotel Booking Antitrust Litigation, February 18, 2014, Boyle, J.).

The putative class action was filed against 12 hotel chains, a number of online travel agencies—including Expedia, Orbitz, Priceline and Travelocity—and a travel industry news company that purportedly facilitated the price fixing conspiracy through its annual industry conferences.

In an effort to support their theory of an industry-wide conspiracy to uniformly adopt resale price maintenance (RPM) agreements, the plaintiffs alleged two sub-agreements that held the purported scheme together: a horizontal agreement not to compete among the online travel agencies (OTAs) and the individual RPM agreements between each OTA and defending hotel pair.

The consumers contended that they plausibly alleged a conspiracy based on the defendants’ parallel conduct—the uniform adoption of similar RPM agreements and the resulting rate parity these agreements created in the online market for each hotel defendants’ rooms—as well as “factual enhancements” that placed the parallel conduct in a context suggesting a conspiracy.

The court held, however, that the defendants’ parallel business behavior—the adoption of similar RPM agreements—was not suspicious or suggestive of an agreement. The defendants had suggested that the alleged parallel behavior was simply the result of independent effort of each defendant to protect its business interests by rationally adopting similar vertical distribution agreements.

Moreover, the plaintiffs’ “factual enhancements,” sometimes referred to as “plus factors,” failed to push the parallel conduct allegations out of “neutral territory,” the court decided. The plaintiffs asserted the following enhancements: (1) the existence of price competition before the alleged agreement formed; (2) the OTA defendants’ market power; (3) the defendants’ common motives; (4) inter-firm communications, including pricing discussions, at the EyeforTravel Conferences; (5) coordinated pricing effort; (6) absent collective action, the defendants’ actions would be against their business interests; (7) the defendants’ coercion and enforcement of the RPM agreements; (8) other industry players would like to offer lower prices, but could not due to the restrictive agreements; and (9) investigations by European governments.

The court was not swayed by the plaintiffs’ conclusory assertions that the defendants shared a common motive to eliminate price competition in the online market, or that, without a conspiracy, the RPM agreements went against the defendants’ business interests. Further, other alleged enhancements were nothing more than additional parallel conduct allegations, in the court’s view. The “government investigation” enhancement deserved no inference of a conspiracy at all, according to the court, since the investigations involved European laws, which might prohibit conduct that was lawful under Section 1 of the Sherman Act. Lastly, three enhancements—inter-firm communications, price competition preceding the conspiracy, and the OTA defendants’ market power—merely detailed the “neutral territory” in which the parallel conduct allegations resided.

State consumer protection claim. Claims that the defendants violated 40 or more state consumer protection statutes through their advertisements of “lowest” or “best” price guarantees on rooms sold online also were dismissed. The plaintiffs plausibly alleged that the rate guarantees were “deceptive” or “unfair” under the consumer protection statutes. The rate guarantees unscrupulously promised the best rate without any indication that the particular rate was actually the same as all other rates offered online, the court noted. However, the plaintiffs failed to adequately plead proximate causation, because their alleged injury—payment of supra-competitive prices—had no plausible connection to the misconduct at issue—the defendants’ low or best price guarantees.

Although it was unclear whether the plaintiffs would be able to come forth with additional facts to overcome the pleading deficiencies, the court dismissed the claims without prejudice and allowed the plaintiffs an opportunity to re-plead.

The case is No. 3:12-cv-3515-B.

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Richard Kimowitz. Christopher S. Yates (Latham & Watkins LLP) for Orbitz Worldwide Inc. Anne Y. Lee (Covington & Burling LLP) for Expedia Inc. and Hotels.com LP. George S. Cary (Cleary Gottlieb Steen & Hamilton LLP) for Travelocity.com LP. Kevin J. Arquit (Simpson Thacher & Barlett LLP) for Priceline.com Inc. Francis J. Burke, Jr. (Foley & Lardner LLP) for Trump International and Hotels Management LLC.

Companies: Orbitz Worldwide Inc.; Expedia Inc.; Hotels.com LP; Travelocity.com LP; Priceline.com Inc.; Trump International and Hotels Management LLC

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