Hyatt, Hilton Among Chains Facing Antitrust Class Action (1)

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By Eleanor Tyler

Hyatt Hotel Corp., Hilton Worldwide Holdings, Marriott International Inc. and three other major hotel chains are accused of agreeing not to use each other’s names in online search advertising to reduce head-to-head competition and raise prices.

The March 19 complaint says 60 percent of hotel room inventory in the U.S. is involved in the lawsuit. The plaintiffs sued Hyatt, Hilton, Marriott, InterContinental Hotels Group PLC, Choice Hotels International Inc., and Wyndham Worldwide Corp.

A putative class action filed in the U.S. District Court for the Northern District of Illinois claims those agreements illegally restrain consumers from seeing competing options when they search online and then make hotel room purchases. The plaintiffs seek treble damages under federal antitrust laws on behalf of everyone who booked a room online in the U.S. between January 1, 2015, and the present.

The plaintiffs contend that the hotels’ agreement not to use each other’s intellectual property (branded names) in their own keyword search advertising and the enforcement of those same terms at online travel agents has made it harder for consumers to compare prices. They say that by avoiding these “readily available online advertising methods to compete for consumers shopping for hotel rooms,” the hotel companies are engaged in illegal bid rigging.

Search Secrets

Demonstrating why a search returns specific results, and tying that to particular customer outcomes, may be difficult.

The complaint includes screenshots of searches on hotel brand names and locations as examples searches turning up only results that include that brand. As an example, the complaint says, if you search for the Honolulu Hyatt, you won’t get any search results that show you a Hilton in the area.

The world of online search is, however, more complex than that. Industry participants told Bloomberg Law that how search results display is more a result of how the search engine structures its results than a reflection of a hotel’s intent in advertising.

“Google and Bing’s algorithms are notoriously secret and a lack of an ad on an individual search doesn’t prove collusion or mean that an advertiser chose not to participate in the auction,” David Naffziger, CEO of online brand protection software provider BrandVerity told Bloomberg Law.

The complaint compares the hotels’ agreement not to use each other’s brand names to conduct the Federal Trade Commission recently attacked in the contact lens industry. In late 2017, an FTC administrative law judge held that online contact lens retailer 1-800 Contacts Inc. unlawfully restricted competitors from buying ads on results pages generated in response to searches for “1-800 Contacts.” 1-800 Contacts made agreements with at least 14 rivals not to do so, which the FTC said was unfair competition.

1-800 Contacts has appealed that decision to the full FTC, and the appeal is pending.

The case is Tichy v. Hyatt Hotels Corp. , N.D. Ill., No. 18-cv-01959, 3/19/18 (N.D. Ill. 3/19/18).

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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