Open letter to William Baer, Arnold & Porter LLP

Dear William,

I have been reading with great interest your nomination to head up the Justice Department’s Antitrust Division. Particularly significant to me was to hear your stance on resale price maintenance with respect to the Leegin case.

Some background. Skoosh is a small U.K. based online travel agent (O.T.A.) specializing in hotel bookings. Until 4 years ago our business was growing at an impressive rate. We operated at small, but healthy, profit margins and much of our business came through price comparison sites where our competitive price advantage was clearly visible.

Then the industry started to move against us. Initially, some of the world’s major hotel chains wrote to me directly demanding that Skoosh either raised its rates to the same as the hotels and its other distribution partners (a practice known in the industry as ‘rate parity’ – see ‘Holiday Inn New York’ attachment) or remove the hotels entirely from our site.

Under concerted pressure from the chains, often accompanied by legal threats, we sometimes complied. Where we didn’t, the hotel chains went to our wholesale suppliers and pressurized them to disconnect their properties from Skoosh. Our main U.S. supplier complied and our $4m account with them dwindled to nothing.

Before departing the U.S. hotel business, Skoosh approached the D.O.J. to review the matter on anti-trust grounds. After what appeared to be a rather cursory examination of the case, the D.O.J. rejected our complaint. The sole argument, it appeared, was that post-Leegin there was no appetite to examine these sorts of cases in such detail.

I took the same case to the Office of Fair Trading (O.F.T.) here in the U.K. along with a weight of written evidence showing the level of intimidation that was being applied to Skoosh, our suppliers and some of direct competitors. After reviewing Skoosh’s claims for 6 months the O.F.T. began a formal investigation.

Last week, the O.F.T. issued a Statement of Objections against three of the main proponents of rate-parity. – Booking.com (subsidiary of the U.S. company Priceline), Expedia and the Intercontinental Hotel Group (I.H.G.). My understanding from reports in the press, Expedia has applied for immunity whereas Booking.com and I.H.G. deny any wrongdoing.

The case I brought to the States was the same as the one in the U.K. although with one significant difference. In Europe, rate parity has been developing rapidly in the last few years and my intention here was to try and halt its expansion whereas in the States it is already pervasive across the entire hotel industry. Skoosh was blocked over there in every direction. Shortly after the O.F.T. announced the start of their formal investigation our biggest trading partner, Kayak, cut its partnership with Skoosh with no explanation despite 5 successful years of cooperation.

From a consumer’s perspective, which I understand is core to anti-trust cases, what’s happening is this. Hotel chains and O.T.A.s are agreeing to sell rooms at exactly the same price and they are all, in turn, guaranteeing to the consumer that the best price is available on their own sites. What they’re not saying is that the confidence of their guarantee stems from the fact that they have agreed to sell at the same rate and that they collude to intimidate any companies openly discounting and withdraw supply from them.

Effectively, small companies like Skoosh which take the standard approach to gaining a foothold in an industry by undercutting their larger competitors (as their lower running costs enable them to do) have been precluded from doing so in the U.S. hotel industry through the aggressive enforcement of R.P.M. Booking.com has an army of rate parity monitors operating from offices worldwide.

I strongly believe that the lack of clarity in competition law post-Leegin was the main contributing factor inspiring large companies in the hotel industry to take advantage of the situation. Most likely the same practice is right now being extended to other industries.

I realise to a greater or lesser extent that I am preaching to the converted. I’m not sure to what extent you’re able to assess the merits of this case in the States prior to your appointment but I trust the matter will be of interest to you.

For Skoosh’s own protection and in the interests of transparency I have included a copy of this email on my own blog. I would not necessarily expect you to reply publicly (or, indeed, at all) and I will keep any response confidential should you wish me to do so.

Yours sincerely,

Dorian Harris
Director
Skoosh

You can leave a response, or trackback from your own site.

Leave a Reply

*