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Report warning of rip-offs by online travel agents urges top level inquiry

Published 20/04/2016

A report calls for an urgent inquiry as it warns of rip-offs by online travel agents
A report calls for an urgent inquiry as it warns of rip-offs by online travel agents

Online travel agents are exploiting, misleading, and ripping off customers to such an extent an urgent top level probe is needed to police them, a Lords report warns.

Rigged pricing, fake reviews, doctored search options, and "intimidation" of hoteliers to stop them offering cheaper deals have all been identified as dodgy practices deployed in the burgeoning digital travel sector by the upper house's EU Committee.

Peers have insisted a rapid investigation by the Completions and Markets Authority is needed to bring the industry into line.

Committee chairman and Labour peer Lord Whitty said customers are getting a raw deal when they log on for travel bargains.

"We heard of an array of worrying practices by websites that simply aren't transparent enough and leave consumers vulnerable to exploitation - from fake reviews to personalised pricing, from baffling privacy agreements, to rigged displays of search results.

"The online travel agent sector is a particular concern. We heard that the use of price parity clauses, which require hotels to offer online travel agents their best price, stifled competition and harmed consumers.

"Even though some of these price restrictions have been banned, we heard allegations that online travel agents had intimidated hotels for offering better deals to their competitors.

"Witnesses described a number of practices by online travel agents intended to mislead consumers.

"The committee heard claims that online travel agents have intimidated hotels which gave better rates to their competitors and used deliberately misleading messages about vacancies, and so-called 'shell websites' which pretend to be the hotel website to take bookings at a higher rate.

"We urge the Competition and Markets Authority to carry out a rapid market investigation into this sector," Lord Whitty said.

The report warned online travel providers were offering "rigged prices", such as personalised pricing where online platforms use information provided, or revealed, by the consumer to determine an individual price for a particular item or service.

A traffic light-style, green, amber, red, kite-mark safety system should be forced on all EU websites and apps so customers can see which ones can be trusted most, the committee recommends .

The report calls for consumer protection laws to be updated to require online platforms to be transparent about how they rank and present search results, publish ratings and reviews, and when they use personal data from consumers to determine prices.

Collaborative and sharing economy platforms should also be clearer about their consumer protection obligations, peers demand.

The report states that Britain is uniquely poised to do well out of an EU-wide single digital market as 17 of the union's 40 so-called "unicorns" - tech start-ups valued at one billion US dollars - are based in the UK.

The committee, which has been investigating whether large online platforms, such as Google, Amazon, Uber, and Airbnb, operate above the law, said a new regulatory system was not needed as long as existing rules were updated and implemented properly.

The report said competition law is too slow to react to concerns about market dominance as it cited the European Commission's five year probe into Google.

The committee also called for the rules on mergers to be revamped to prevent large online platforms acquiring smaller competitors and escaping scrutiny by competition regulators because they fall below turnover thresholds.

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