Open Letter to Gaucho Rasmussen, Enforcement Director at CMA

Dear Gaucho,

You’ll remember that earlier this year I applied for my barrister to receive a copy of the case the Office of Fair Trading (now CMA) took out against Expedia, Booking.com and Intercontinental Hotels. The case, as set out in the CMA’s ‘Statement of Objections’, detailed the possible areas of anti-competitive behaviour of the above defendants.

On that occasion, access to the Statement of Objections was denied to Skoosh’s barrister on the basis that it wasn’t relevant. However, now that Skoosh is challenging the CMA’s decision with the Competition Appeal Tribunal I feel that document is more relevant than ever and I am uncomfortable knowing that I am the only person to have a copy.

Whilst I take your point that the original case is the CMA’s, with Skoosh merely the complainant, I also see it as a matter of public interest. To put it another way, the UK tax-payer paid for a case which it never saw, which was concluded to the open dismay of not just Skoosh but also by large sectors of the travel industry, and which threatens to fundamentally change the way UK travellers book hotel rooms.

Without any legal assistance I can’t know with any degree of certainty whether the Statement of Objections contains any material which would be relevant in the tribunal. The CMA’s repeat reminders that unauthorized disclosure is a criminal offence makes me wonder whether there is anything in there. That said, I don’t need reminding and I won’t illegally disclose it under any circumstances but I would like your approval to disclose the case to my barrister at the very least. If he decides it is irrelevant we can ignore it of course.

On that basis, would you please reconsider my application to disclose the Statement of Objections to my barrister.

Kind regards,

Dorian Harris
Director, Skoosh.com

p.s. In the interests of transparency a copy of this email has been posted on my blog at dorian.skoosh.com

Share

Closing Letter to the Office of Fair Trading

Hi Ingrid,

Thank you for taking the time last week to try and explain the proposal you have put forward on behalf of Expedia, Booking.com and IHG.

I still don’t understand it I’m afraid. I don’t understand how you expect it to work practically and I don’t understand how it can possibly be seen as a measure to stop Expedia and Booking.com further stifling the hotel industry.

I came to you saying that Expedia and Booking.com are preventing my company, Skoosh, from offering discounted hotel rooms by intimidating my suppliers. I told you that they’re also preventing hotels from offering deals directly to guests. I told you that they’re deceiving the public into believing that they have the best prices themselves. And I told you that they’re buying price comparison sites so they can spy on their competitors and force them to raise their prices.

That your proposal doesn’t solve my concerns is not an issue. The problem now is that you’ve left people in a state of confusion. As a public body, paid for by the tax payer, you’re duty bound to put out clear messages both to industry and the consumer. You’ve done neither. I’ve got travel agents, hoteliers, journalists, economists and lawyers asking me to make sense of your proposal and I can’t of course because I have no idea what you’re trying to achieve.

I’ve also got lawyers urging me to take this to a judicial review or all the way to the European Court of Human Rights. I don’t intend to do either. As sceptical as I am about the arrangement you’ve come to with the defendants, and as much as I’d like to challenge the absurd lack of transparency in your organisation, for my part I just want to have the details out here on public record and leave anyone else to take it up as they see fit.

Kind regards,

Dorian Harris
Founder, Skoosh.com

Share

Open Letter to Martin Couchman, Deputy Chief Executive of the British Hospitality Association

Dear Martin,

Further to our recent conversation, I understand that it is awkward for you to involve the British Hospitality Association in the ongoing price fixing investigation in the hotel industry because many of your members are unsure about their legal standing. I now feel that’s exactly why you need to step in.

As we all know, there’s an elephant in the corner of this industry the size of the Ritz. We exist in this grey legal area of fixed prices or ‘rate parity’, a practice that underpins all our individual businesses. Yet no-one knows if it is legal. In the meantime we can’t move forwards or backwards because we’re too scared we’ll either be punished by the authorities or our trading partners.  Apart from a couple of major players, this industry is stagnating.

I am also now in an uncomfortable position in that I am being asked to assist hotels in a case which I no longer even hold as my own.  One wrote to me:

“I am aware of the devastating effect some OTAs have on the industry…We need all the help we can get and you seem to know the problem well”.

However, the OFT is no longer representing my interests. I am not sure who they’re representing any more but I do know that the commitments in their recent proposal, if accepted, will affect every one of your members in one way or another.

To be clear I was never asking you to come down one way or another in your position on this. I was only proposing that your members were made fully aware of what’s at stake with the commitments in the OFT’s proposal.

As much as I want to help my colleagues in the industry it is time for others to take over. As the representative of the British Hotel Association I’m hoping you can manage the way out of this. It would be wonderful if Britain could take the lead in solving this global problem.

I have taken the liberty of copying in Gaucho who is heading up the investigation for the OFT. Also, in the interests of transparency, I have put a copy of this correspondence on my blog.

Kind regards,

Dorian Harris
Founder, Skoosh.com

Share

Another Final Open Letter to Clive Maxwell, Executive Director Office of Fair Trading

Dear Mr. Maxwell,

Thank you again for taking the time to reply.

Whilst I understand that the OFT doesn’t necessarily agree with the complainant about the nature of the problem nor indeed the solution, I am afraid that’s not a satisfactory response in this case because the OFT clearly hasn’t understood the industry. The net result is that it hasn’t solved anyone’s problems bar the defendants.

Legal Uncertainty

To remind you, I run a UK business and I came to the OFT more than 3 years ago to explain that I am severely hampered because my competitors are forcing me to sell at the same prices as them. It transpired that it wasn’t just happening to me but many other UK travel agents and thousands of UK hotels.

All these businesses, including mine, operate in an area of legal uncertainty. Meanwhile our ability to trade is severely restricted by a small number of companies that are benefiting from the same area of legal uncertainty. All I wanted to know, and now what all these businesses want to know, is whether this practice is legal or not because we can’t move forward without this clarity. The OFT has always told me ‘no-one is saying this is legal’. Three and a half years later I still don’t know what that means.

Illusion of Improvements

What’s concerned me in this particular case is that the OFT has put forward a solution dictated by the defendants which not only doesn’t tally with my complaint but that also demonstrates such a distinct lack of understanding of the hotel industry as to make it baffling.

Take the fact that the discounts the OFT has accepted Expedia and Booking.com proposes to make already exist in the market. ‘Closed groups’ are around already. My contention to the OFT was not that they didn’t exist but that they weren’t sufficient. Now the defendants have convinced your team that they’ve created something new. And, perversely, they’ve also offered an extra restriction on consumers accessing closed groups which benefits no-one but themselves.

Climate of Fear

So that’s one problem. Another was the OFT’s failure to understand the tensions in the travel industry. It doesn’t make sense to put out a public consultation in an industry that operates in a climate of fear and intimidation. That can’t be news to the OFT as I have sent it endless evidence to that effect, it’s everywhere on the internet, and publicized by Europe’s hotel association. For all that, it appears that the OFT doesn’t even offer much in the way of concrete security to those offering a response to the proposal and my guess would be that almost no-one has replied.

So there’s a proposal out there in the public domain which is almost unintelligible for all its flawed understanding of the industry. And it is awaiting a response from an industry that only endures the suffocating conditions because it is oppressed by the very defendants that have made this proposal.

Little faith in the OFT

Whether or not the OFT has responded to my complaint or the concerns of the industry is one thing. Perhaps the biggest worry about all this is the abject despondency of the UK consumers. They have precious little faith in your organization to protect them. Read any the comments on any of the huge number of articles written about the case and you’ll quickly see what I mean. Here’s a small selection from recent articles in the Sunday Times and Daily Mail:

- Hotels fix prices?  Get away!

- The OFT started investigation in 2010 and will report back soon. Has anyone told them its the latter part of 2013? It doesn’t take much thought to realize the OFT survives from public money and don’t know that the word efficiency means.

- that is truly shocking. think about it. its like your barrister colluding with the prosecution.

They’ve been told banks are too big to fail. And now they’re being told the travel companies are too big to fail. They didn’t accept the former and I think it’s even less likely they’ll accept the latter. Whilst I appreciate your replying to me it’s really the consumer that needs your response and I don’t think the commitments in the proposal even start to offer that.

Yours sincerely,

Dorian Harris
Skoosh

Share

Final Open Letter to Clive Maxwell, Executive Director Office of Fair Trading

Dear Mr. Maxwell,

Thank you for kindly replying to my last open letter.

Since you wrote I have been petitioned by lawyers, economists, and high ranking officials in the travel industry to respond to your team’s proposal to ensure that it doesn’t get through unchallenged. However, I can’t find it in myself to respond or even attend one final meeting.

I had no experience of competition bureaus when I started my campaign three and a half years ago but I was aware of the enormity of the challenge I was making to the hotel industry. For various commercial and personal reasons I felt that I had to take this one on.

The backlash against Skoosh was inevitable and it nearly bankrupted us a company. My colleagues all stood by and supported me even though they knew their jobs would be compromised. In 2011 I had to take the painful decision to make most of them redundant.

Along with many other travel agents and thousands of hotels we continue to be bullied by Expedia and Booking.com on a daily basis. I have no confidence any more that the OFT will resolve this issue but take comfort in the expectation that competition authorities across Europe and the U.S. will take decisive action against this abuse.

It is disappointing to see the OFT pandering to the specious concerns of the defendants. I see the OFT’s passive approach both as a direct cost to the consumer and, worse, a cost to society as it will give further confidence to big businesses looking to trample over their suppliers and competitors and even customers.

For all that I am now officially removing myself from the consultation process so I can return to my business and my life. I hope you can and will do whatever necessary to ensure the OFT’s case doesn’t undermine those of your European counterparts.

Yours sincerely,

Dorian Harris
Skoosh

Share

Open Letter to Clive Maxwell, Executive Director Office of Fair Trading

Dear Clive,

I hope you don’t mind my writing to you publicly but I feel this is an issue of public and national importance.

Three years ago I complained to the Office of Fair Trading (O.F.T.) that my competitors (primarily Expedia and Booking.com) were routinely policing the internet for companies undercutting them and closing down their supply.

In a bold move, the O.F.T. started an investigation even though the other authorities I approached were hesitant. Since then though others have followed the O.F.T.’s lead and there are further investigations in France, Switzerland and Germany and 31 class actions in the U.S.

I was naturally both proud and comforted to be in a country with such a strong regulatory body and until recently I thought it was making substantial progress. Then, last week, their investigation took a bizarre turn. Somehow, the defendants in this cartel case have managed to persuade your team of investigators that they have some credible efficiency concerns which merit their having a degree of legal protection.

One of these concerns is to protect their investment in advertising. Can it be true that the consumer has to support the vast advertising expenditures made by these companies? I would have thought these costs only serve to inflate hotel prices.

Similarly these companies asked for protection to support their expenditure on customer service and technology. Whilst they both have decent sites I can’t equate their position in the market with the likes of Amazon or Apple. If they disappeared I’m confident the gap would be quickly filled.

A big gap numerically though. These companies asking for special treatment now have nearly 70% of the European market between them. They appear to have grown remarkably effectively without the assistance of the competition regulators.

I realise it’s not typical for you to get involved in current investigations but I urge you to make an exception here. It is damaging the credibility of the O.F.T. and all the other competition authorities around the world looking to challenge the defendants’ monopolisation of the hotel industry and inflation of hotel prices.

Yours sincerely,

Dorian Harris
Founder and Traveler

Share

Open Letter to the U.K. Bargain Hunter

Dear Sir / Madam,

Over the last few years we have all stood on the sidelines as stories have emerged about big corporations fiddling the system to their advantage and to our cost. Well, now is your chance to speak out.

Three years ago the Office of Fair Trading (O.F.T.)  started investigating Skoosh’s complaint that consumers were being precluded by the biggest online travel agents from booking hotel deals.  To address these issues the O.F.T. put out a public consultation document last Friday asking all of us to comment on their new proposals for making access to hotel deals easier. We believe that the proposal will actually make it harder for you to find a hotel deal.

Below we have summarized the main points in the proposal and we have also listed some of the evidence of perceived wrongdoing we sent to the O.F.T. , including threats of violence and intimidation against us.

The O.F.T. has posted its proposal here. Unfortunately it is a 40-page document but much of the important information is near the beginning. The address to email your thoughts is hotelonlinebooking@oft.gsi.gov.uk or you can add a comment to this blog.

Best wishes and safe (affordable) travels,

Dorian

 

A summary of the O.F.T.’s proposal

- Current Status (Hobson’s Choice)

Booking.com, Expedia and Intercontinental Hotels (the three defendants) have signed agreements not to compete with each-other. So it doesn’t matter which one you book through you’ll see exactly the same price. They’ve also enforced this agreement across the whole industry so even if you book a room through us or another company it will still be the same price.

Currently, one way around this is to book through members-only sites where the prices are hidden until you enter an email address and a password.

- New Proposal  (Catch 22)

Under the new proposal you can still book a deal on a members-only site but only if you have previously made a booking through the site (the catch). Email and password or Facebook logins will no longer suffice as the discount website has to specifically invite the customer to access its discounted hotels.

 

The Evidence

This selection of evidence was submitted by Skoosh to the O.F.T.  over a period of 3 years.

Mr. Happy (Explicit lyrics) – Apr 2010

Ahead of our making a complaint we received this call from an irate hotelier clearly under pressure from Booking.com to get his hotel removed from Skoosh or risk being delisted on Booking.com

Kenzi Menara Palace (Aug 2010)

One of a vast number of hotels hassled by Booking.com to remove its property from the Skoosh website.

Kayak Termination (Oct 2010)

Less than a month after the O.F.T. announced it was formally investigating Skoosh’s complaint our biggest commercial partner, the price comparison site Kayak, cut its ties with Skoosh.

Rate Parity Associate Booking.com (March 2011)

Evidence that Booking.com specifically employs people to police the internet. The practice still goes on today.

Marmara Hotel Budapest (July 2012)

Booking.com emails the hotel to notify them that Skoosh is selling below their (Booking.com’s) price. Booking.com recommend that the hotel makes a [fake] reservation on the Skoosh website to find out who Skoosh is buying from.

Best Western Sheldon Park (July 2012)

Despite Expedia’s application for leniency with the O.F.T. Skoosh provided evidence that Expedia was still hassling hotels with rate parity challenges across the water in Ireland.

Class Action against the hotel industry (Aug 2012)

The action claims Expedia and Booking.com among others “conspired” with hotel chains to create a scheme that would “fix the retail price for room reservations” and therefore impact competition in the marketplace for other intermediaries.

Rate Parity Dilemma (Sep 2012)

The industry speaks out. Swiss hotel school says that rate parity is now the biggest dilemma facing hoteliers.

Booking.com Reveal their true face (Oct 2012)

A report by an industry commentator (unconnected to Skoosh) explaining the predatory nature of Booking.com.

Holiday Inn Reading (Nov 2012)

The hotel tells Skoosh that they have been fined by their franchisor, I.H.G., for allowing discounted rates to be made available to the public.

Scandinaviation Hotels break off from Expedia (Dec 2012)

Some signs of progress. We hoped this would demonstrate to the O.F.T. just how widespread this price-fixing practice extends.

Swiss Competition Office (Dec 2012)

The case widens further. Switzerland’s Competition Commission stated it suspects that Expedia’s and Booking.com’s best-rate guarantees — Bestpreisgarantien — with hotels, could “constitute illegal restraints.”

Objection to Expedia’s purchase of prices comparison site Trivago (Jan 2013)

Skoosh voiced its concerned that were Expedia allowed to buy a price comparison site it would further shore up its dominant market position. The acquisition went through.

Objection to Priceline’s Acquisition of Kayak (March 2013)

Skoosh objects to Priceline (Booking.com’s parent company) buying Kayak, the only major price comparison site in the U.S. and one which is looking to move into Europe. The acquisition went through.

French Hotels take on Expedia and Booking.com (July 2013)

France’s biggest hotel employer’s union, UMIH, argues that the main online travel agents including Booking.com and Expedia are breaking French and European competition rules by forcing hotels to give them their lowest rates, and then barring them from offering discounted rates elsewhere, including on the hotels’ own websites.

Share

Priceline, Kayak and other family matters.

Incest has a bad rep and you can see why. It often results in the spawning of children with weird defects like underdeveloped limbs or oversized heads. Take the royal family for example or the U.S. hotel giant Priceline.

There is speculation in the media today that Priceline’s acquisition of the price comparison site, Kayak, has been delayed pending the investigation by the U.K.’s Office of Fair Trading into Priceline’s daughter company Booking.com. You’d bloody hope so, it’s disgusting! And this acquisition is a nonsense. Why on earth is Priceline trying to buy a price comparison site which is at odds with its own M.O.?

Priceline’s original business model was essentially an auction whereby customers bid for hotel rooms. This peculiar concept emerged as a result of the hotel industry’s adoption of ‘rate parity’, a statute whereby all online distributors are bound to sell hotel rooms at exactly the same price.

The only exceptions to this industry rule are business models whereby the consumer – you and I – can’t make direct comparisons between prices on different sites and thereby shop around for better prices. Lastminute.com’s ‘Secret Hotels’, in which customers are not told the name of hotel until they’ve booked and paid, is one of these exceptions. Priceline’s bidding system is another.

I am all for companies doing what they can to circumvent restrictive and most likely illegal contract clauses. However, not in Priceline’s case.

Some years ago Priceline bought Booking.com which, alongside Expedia, is one of the biggest proponents of rate parity. It doesn’t just advocate it, it insists on it, and it employs teams of rate parity monitors to police the internet for rogue companies like Skoosh undercutting the parity rate. When it finds them it contacts the hotel in question which has allowed a lower rate to hit the market and it threatens them with delisting from its now market dominant site.

In part because of the prevalence of the rate parity restriction which Booking.com has fostered and in part because of the eye-watering $1 billion annual advertising spend its doting parent Priceline has put behind it, Booking.com is now the world’s preeminent hotel site. And Priceline liked its daughter’s business model so much it adopted it for itself in preference to the auction.

It’s not often you see a parent adopt its own daughter but peculiar things happen in the hotel industry. And that brings me on to Priceline’s rather incestuous acquisition of Kayak.

Kayak is a price comparison site to which people flock to compare prices, as you’d expect. It’s a great concept and one which Skoosh happily benefitted from during its 5 years of cooperation despite the underlying concern that we were always going to be at a disadvantage to the nepotistic founders and CEOs (harsh words, I know, but it’s all in writing).

Almost as soon as it was announced that the O.F.T. was investigating some of the major Kayak partners, namely Expedia and Booking.com, Skoosh was unceremoniously dumped  with a chilling and unexplained 30 days notice. We took that on the chin, among other places, and continued our own journey.

When Priceline announced that it intended to acquire Kayak last year I didn’t lodge a complaint simply because I couldn’t imagine a competition authority worthy of the name letting that one slip through. A price comparison site being bought by the leading advocate of uniform pricing? It’s as unthinkable and nonsensical as a price comparison site in Soviet Russia – ‘any price you like as long as its this one’.

I’ve published enough articles now to know not to believe everything I read in the press but God knows I hope this speculation about Priceline’s bid being stalled by the O.F.T. is true. Or perhaps this isn’t really a competition issue at heart and with all this parent-daughter and extended family stuff going on, someone should be referring the matter to the social services.

Share

Karma Happens

Tom and I were round Nicole’s for dinner the other night and Nicole sounded a bit peeved when she discovered Tom had received an invite to SkooshKarma and she hadn’t. ‘It’s not as simple as that’, I explained patiently, ‘it’s organic and spiritual, it needs to come to you’. She looked blank so I added ‘think of it as part of a long journey without a timetable’.

Nicole gently nodded and I thought I may have gotten through. ‘Think of tonight’s dinner as organic and spiritual and part of a long journey up your karmarama!’. We left it there.

Everyone will be invited in time but SkooshKarma will mean different things to different people, that’s always been clear. For some it may appear a strange juxtaposition of political outrage and sound commercial thinking. For others, a good place to book a cheap hotel. At the risk of sounding like El Duderino, there is no right or wrong, man, there’s just a lot of ins and outs.

The way I see it, people can be broadly divided into Puppies and Hedgehogs. Puppies are adorable things but about as stupid as you can practically be without the benefit of recreational drugs. They’ll endlessly run after balls, stones and anything that looks like a ball or stone without any recollection of having done the same thing fifteen seconds prior. Most football players and celebrities are the human equivalents.

And then there are what Isaiah Berlin terms Hedgehogs. These creatures are virtually indestructible because they have the ultimate defense in that they can roll into a spiky ball to deflect any predators. In this bracket we have esteemed scientists like Richard Dawkins, the vast majority of politicians, many religious folk and the scourge of all mankind, consultants.

Until I was 28 I was a self-declared Hedgehog. And then I discovered that everything I thought I knew had been grossly misinformed to me by other supposed Hedgehogs in the form of teachers, rabbis, employers and the like. So I disappeared off to an island in Indonesia to reflect on what I actually knew for myself. It was a humbling and intensely disturbing experience. The more I prodded the more my bank of intellectual learnings dissolved in front of my eyes and eventually I was stumbling around and yelping like a demented puppy.

That’s another story in its own right and, as we know, I recovered at least a semblance of knowing the odd thing even though, inside, I am fully aware that I know nothing. This was all brutally reinforced to me twice recently. First, when my hero, Lance Armstrong, turned out to be a sociopathic junkie and then when I read Nobel Prize winning, Daniel Kahneman’s, ‘Thinking Fast and Slow’.

If you have any Hedgehog-like pretensions I strongly recommend you read it. Either way, here’s your executive summary. Everything on average is average. Anything that appears to be anything other than average is an illusion but readily and confidently explained by so-called experts in the field.

It gets worse. It turns out that these experts, whether they be scientists or stockbrokers, racing pundits or wine connoisseurs, are considerably worse at understanding and predicting their own areas of specialization than dart throwing monkeys. If you hear someone start a sentence with ‘I believe’ or ‘I think’ walk away. If they tell you they actually ‘know’ something to be true, punch them.

With that out the way, let me tell you about SkooshKarma. It’s a hotel booking site, sure, but there’s so much more to it. It is the culmination of fifteen years of deep thinking and a visual representation of how I believe things to work. It is premised on Buddhist philosophy, powered by the laws of nature and challenges, if not entirely dismisses, conventional commercial wisdom.

This is going to be lost on most people, of course, but you strike me as the sort of person capable of grasping the subtle complexities. And, on that basis, I’d like to personally invite you in. You just need to click on the invitation on the left and come inside to see what the fuss is all about.

If you spot anything in there which you think you could do better just pop me over a message and I’ll file your suggestions with my whistle and dog biscuits.

Share

Final Open Letter to F.T.C. Chairman Jon Leibowitz

Dear Mr. Leibowitz,

Almost exactly 2 years ago in November 2010 I brought to your attention the fact that the largest travel companies in the U.S. were working together to preclude price competition in the hotel industry. I’m not sure how much time you were able to spend reviewing my case or whether you deemed it a priority. I assume not. The situation has now got worse.

It was announced yesterday that Priceline has bought Kayak. In other words, the most dominant force in the hotel industry has acquired the only significant price comparison site in North America. It’s a crushing blow for the travel industry and the consumer.

The consolidation not only reduces competition but also removes downward pressure on prices. Priceline works on a commissionable model with hotels so the higher the rate the customer pays the better it is for the company. Indeed, Priceline has spent half a decade forcing its competitors to raise their prices.

As a price comparison site Kayak should in theory seek out the best discounts for its visitors but, as a result of price parity in the hotel industry, it has no competitors and will get paid advertising revenues regardless of the rates available on its site.

You may suppose that there’s sufficient inter-brand competition to keep the market fluid but that’s not the case. Hotel chains also work on a commission so they want to sell at the highest rate possible and they hunt down discounters, with threats of legal action.

So it has long been in the interests of all the major players to keep rates high (and, remarkably, at exactly the same level) and now they are joined by Kayak, the one company which should be setting competitors apart in aid of the consumer.

I don’t propose to open up a formal complaint against this acquisition because I feel that Skoosh has done more than its fair share to highlight the imbalance in our industry. At the same time, I could not watch this one pass by without note. Consumer have been hurt badly enough by the banks, we don’t need this nonsense in the travel industry.

If the F.T.C. doesn’t step in with the greatest of urgency, the hotel industry in the United States will be so skewed by this latest monstrous tie-up you may never be able to unravel it.

Yours sincerely,

Dorian Harris
Director

Share