Skyscanner: CAT quashes commitments in the online booking sector

In a judgment handed down on Friday, the Competition Appeal Tribunal has quashed the Office of Fair Trading’s decision to accept commitments in the online hotel booking sector. As the first case to consider such commitments, Skyscanner Ltd v CMA [2014] CAT 16 contains some helpful guidance, albeit that Skyscanner’s success actually hinged on a fairly narrow point of regulatory law.

The OFT spent three years investigating the online hotel booking market, concerned about agreements which restricted the ability of online travel agents to discount the price of hotel rooms. Eventually, a couple of online agents and hotel groups offered commitments. Under the commitments, the agents would be allowed to offer limited discounts, but only to customers who had previously booked through that agent and then joined a “closed group” of customers entitled to a discount. The size of the discount would only be visible to members of the closed group.

Under section 31A of the Competition Act 1998, the OFT (now the CMA) may accept commitments to address its competition concerns. When commitments are accepted, the OFT’s investigation comes to an end. A decision to accept commitments can be appealed to the CAT, but only on judicial review grounds.

The CAT heard much debate about how far commitments have to go towards meeting the OFT’s concerns: must they “fully address” the OFT’s concerns, or could the OFT accept commitments which only partially address their concerns? The Tribunal’s answer, at paragraph 119, is that:

commitments will normally be accepted where the competition concerns are readily identifiable and fully addressed by the commitments; and the proposed commitments are capable of being implemented effectively and, if necessary, within a short period of time.

However, this statement of principle needs to be seen in context. On one view, the commitments in this case did not actually “fully address” the OFT’s concerns – – they did not completely remove the restrictions identified in the Statement of Objections. The commitments allow online agents to discount a bit, but do not give them unrestricted freedom to discount. No matter, says the Tribunal: the OFT is entitled to “strike a balance” between its initial position, as set out in the Statement of Objections, and the opposing views of the parties under investigation.

So much for the general principles – now for Skyscanner’s victory, which I (perhaps unfairly) described above as hinging on a narrow point of regulatory law.

Skyscanner is not an online travel agent, and it was not involved in the OFT’s investigation. It is a price comparison website for consumers to compare prices offered by various online agents and hotels. The problem with the commitments, from Skyscanner’s point of view, is that the “discounted” prices would only be visible to members of the agents’ “closed groups”. So, if a consumer were to search for a hotel room on Skyscanner, he would only see the non-discounted prices. If he wanted to know the discounts offered by any online agents, he would need to log in to that agent’s website (assuming he is a member of their group) and see what price they could offer him.

Skyscanner made these points during the statutory consultation which the OFT was required to undertake before accepting the commitments. It argued that the commitments would lead to a lack of transparency, damage price comparison sites, and therefore harm inter-brand competition (i.e. competition between online agents).

The public law duties of regulatory bodies when they consult are well known. Among other things, they must conscientiously take consultation responses into account when they make their ultimate decision. The unusual feature of this case was that the OFT indicated to Skyscanner that it could not take its concerns further without evidence of possible harm, which Skyscanner did not provide. Thus, the OFT said, it did take Skyscanner’s response into account, but in the absence of further evidence, it was given little weight.

The Tribunal held that the OFT’s approach was unfair. It was not right to require Skyscanner to provide further evidence for its concerns. Rather, the Tribunal held at paragraph 90:

If a consultation response raises an important and obvious point of principle, it is for the authority to examine it further. This is particularly so where the authority has not carried out an analysis of the economic effects of the practices which it proposes to address with its commitments decision and where that decision itself may generate its own economic effects within the market.

The matter will now go back to the CMA for reconsideration. Cynical observers of judicial reviews like to emphasise that winning a case on a procedural point is often a pyrrhic victory, as you may end up with a better procedure but the same ultimate decision. In this case, however, Skyscanner may take some comfort from the CAT’s clear sympathy for its concerns. The smart money may be on the commitments being tweaked to make the discounted prices accessible to price comparison sites – or otherwise on the investigation being reopened.

Leave a comment

Filed under Agreements, Procedure

Comments are closed.