(Bloomberg) -- Expedia Group Inc. is under investigation by the Utah attorney general for allegedly conspiring with the biggest U.S. hotel chains to suppress competition in online travel booking.
The office is investigating whether Expedia conspired with Marriott International Inc., Hilton Worldwide Holdings Inc. and other hotel companies to manipulate search advertising on Google, according to papers filed in state court in Utah last week. Other states have joined the investigation, the office said in the filing.
The allegations were raised in a lawsuit filed in December by TravelPass Group LLC, a Utah-based company that sells hotel room inventory through Google search ads. It accuses hotel chains and Expedia of restricting competition to buy those ads and reducing consumer choice.
Lawyers for Utah Attorney General Sean Reyes said in their filings they have “reasonable cause to believe that a violation of the Utah Antitrust Act has occurred based upon the allegations set forth in the lawsuit.”
TravelPass’s complaint, which also names Caesars Entertainment Corp. and Hyatt Hotels Corp. as defendants, stems from keyword bidding on Google’s search engine where companies bid on search keywords to display ads at the top of the search results.
TravelPass claims searches for hotels used to generate an open bidding process where companies could bid on keywords that included their own brand, as well as those of their competitors. For example, a search for “Hilton in Boston,” became an opportunity for any lodgings or travel company to market to someone searching for a hotel room.
Then things changed, TravelPass said in its lawsuit. Beginning in 2014, the hotel companies agreed to stop bidding on one another’s brand names in Google searches in order to avoid price competition. A Google representative told TravelPass last year that the hotel companies had routinely bid on one another’s brands and then abruptly stopped, according to the lawsuit.
The other hotel companies named as defendants are Choice Hotels International Inc., Red Roof Inns Inc., Wyndham Hotels & Resorts Inc. and Six Continents Hotels Inc., part of InterContinental Hotels Group Plc.
Expedia, which also owns Orbitz, hotels.com and Trivago NV, coordinated the conspiracy among the hotels, acting as a go-between for the companies and providing monitoring reports on compliance with the agreement, TravelPass said. Expedia also agreed not to bid on branded keywords and it pushed affiliates like TravelPass, which had access to hotel room inventory via Expedia, not to bid either. Those that did were punished by losing their access to inventory.
It’s illegal under federal law and state antitrust laws for companies to work together to harm competition. If the Utah attorney general determines there is a violation, the office can go to court to stop the conduct and seek civil monetary penalties.
Expedia, Marriott, Choice, Wyndham, Hilton, Hyatt, Red Roof and Caesars declined to comment. InterContinental Hotels said it has not received notice of Utah’s investigation and would respond to TravelPass’s allegations in court.
TravelPass claims the alleged conspiracy shut it out of the market and decimated its value, spurring the investigation by the attorney general’s office.
“The defendant hotels’ illegal activities have severely reduced, and in many cases even eliminated, the revolutionary benefits of the internet economy for hotel consumers,” TravelPass said in its complaint. “The conspiracy has left in its wake an online travel booking marketplace characterized by deliberately limited information and high transaction costs.”
Reyes’s office said in court last week that it had opened its investigation after TravelPass brought its complaint to the office. Utah was in court to force TravelPass to comply with civil investigative demands, which are akin to subpoenas, that the office issued in February and May. The judge ordered TravelPass, which is in an arbitration proceeding with Expedia, to comply.
--With assistance from Patrick Clark.
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