For more than 125 years, federal and state antitrust laws have banned every “contract, combination … or conspiracy, in restraint of trade,” as well as outlawed attempts to monopolize an industry or product line. While agreements among competitors, especially in the area of fixing prices, are the most common antitrust violations, unreasonable restrictions imposed by suppliers on their customers also fall under the antitrust banner—which is where the hotel and travel industries need to exercise caution.
In 2010 and 2011, for example, the Connecticut Attorney General secured agreements from a number of hotels to end the “widespread and long-standing” practice of call-arounds, a practice whereby a hotel contacts its local competition and shares, collects, and exchanges information that is not otherwise public, such as room rates and occupancy rates. The Connecticut agreements followed similar settlements by hotels in the State of Washington several years earlier.
Going back even further, the federal government shut down an airline industry practice of announcing fare increases well in advance of their effective date, allowing for tacit—if not express—collusion.
Enter the Internet
These situations illustrate the point that an actual agreement is often not necessary for an action to violate antitrust law. With the Internet, an innocent post on an industry listserv or LinkedIn group that includes sensitive information, such as rates, could create the opportunity for competitors to gain knowledge they can use to an unfair advantage.
That’s why many hospitality industry listservs strongly discourage, or even prohibit, online discussions of specific fees charged by independent planners. While it is generally acceptable to discuss the benefits or drawback of flat fees vs. commission payments, mentioning of specific hourly or project rates leaves the door wide open for others to use that information to their unfair advantage.
Rules of Reason
Other ways that competitors collaborate is by sharing terms and conditions of contracts (such as payment terms or deposit requirements) or discussing division of territories within which to market or sell. For example, if two organizations sponsor meetings or trade shows catering to similar audiences, they’re not allowed to discuss things such as their registration fees or adjusting the timing of the events to their mutual benefit.
However, a suspect activity may be allowed if it is supported by an argument that it is commercially reasonable. This is often viewed by what antitrust law calls the “rule of reason.”
For example, it is not uncommon for a company holding a meeting in a hotel to secure a contractual provision that no competitors can meet in the hotel at the same time. While it might be illegal to restrain a competitor from meeting in the hotel at any time during the year, eliminating the presence of a competitor while a company’s meeting is taking place helps avoid corporate spying. So the practice is considered acceptable.
Especially with the paper trail provided by e-mail and electronic communication, hotels and meeting planners (especially independent planners) should be sensitive to what information they are sharing or seeking. If there’s any uncertainty, ask a knowledgeable outside party before even launching a questionable discussion.
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