Dick Smith has recently kicked up a mini-firestorm about online travel booking agents (OTAs) engaging in monopolistic practices.
He is largely right.
The two online behemoths in question, Expedia and Booking.com, have nasty uncompetitive clauses in the contracts that they force hotel and motel operators to sign.
‘Pay parity’ clauses ensure that the big OTAs advertise the cheapest rates and the small businesses are not allowed to advertise their own cheaper prices on their own websites.
This becomes an even greater problem when commissions on sales go as high as 20%.
Expedia and Booking.com engage in uncompetitive ‘extortion’
Dick Smith describes it as ‘extortion’.
The reason the two big OTAs can get away with it is the sheer amount of traffic they receive to their websites.
It’s estimated that the two companies account for 53.1% of the Australian OTA market.
Perhaps more concerning is that they encourage bidding on their commission rates by businesses to garner more traffic.
It’s an uncompetitive pay to play scam.
Other countries such as Italy, Germany and France have outlawed some of these practices such as ‘pay parity’ clauses.
ACCC lets uncompetitive practices continue
But the Australian Competition and Consumer Commission (ACCC) is dragging its heels.
In 2016, the clauses were investigated only to allow them to proceed as long as the lower rates were offered over the phone or in person.
This has allowed the two big OTAs to continue to dominate the online sphere.
To be fair, this dominance is partly down to consumer ignorance.
Crafty vacationers can do their own research and find the best prices.
These big companies therefore seem to be making most of their money off laziness.
But ultimately it is about the fact that ‘pay parity’ clauses are un-Australian and monopolistic.
To not be able to charge your own price for your own product goes against the fundamental tenets of capitalism.
It’s as if your hotel or motel is not yours to run as you please.
Australians need to be smarter about the way they book accommodation.
As for the ACCC, the sooner it acts on ‘pay parity’ clauses the better.