The operator of Holiday Inn and Crowne Plaza hotels, along with two of the UK's biggest online travel agents, are under investigation for signing a potentially unlawful deal to limit discounts on rooms.

Booking.com and Expedia entered into separate agreements with Intercontinental Hotels Group (IHG) which are provisionally believed to have infringed competition law, the Office of Fair Trading (OFT) says.

The OFT alleges IHG has set hotel room prices on Booking.com and Expedia, which may breach competition law as it could limit competition between online travel agents and make it more difficult for new online travel agents to attract custom by offering their own discounts.

When hotels sell rooms direct they can set their own prices. But the OFT says if they sell through a third party such as a travel agent, then it should be up to that third party to set prices and to pass on discounts.

The arrangement between Booking.com and IHG is still in place, while Expedia allegedly violated rules between October 2007 and September 2010, the OFT adds.

The investigation was launched in September 2010 following a complaint submitted by a small online travel agent, alleging it was prevented by various hotel chains from offering discounted sale prices for room-only accommodation, the OFT says.

Practices 'potentially widespread'

The investigation focuses on IHG, Booking.com and Expedia but the competition regulator warns the alleged practices could be widespread.

The OFT says all parties now have three months to respond to its findings before the watchdog decides whether they infringed competition law.

IHG says its arrangements with online booking agents are "compliant with competition laws and consistent with the long-standing approach of the global hotel industry".

Clive Maxwell, OFT chief executive, says: "We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers.

"The OFT’s provisional view is that Booking.com, Expedia and InterContinental Hotels Group have infringed competition law.

"However, these are the OFT's provisional findings only. All parties will now have a full opportunity to respond to our statement of objections before we decide whether competition law has in fact been infringed."

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