Guest Post: The OFT, OTAs and metasearch

Guest Post: The OFT, OTAs and metasearch

By Ian Skuse, Piper Smith Watton partner and head of aviation and travel team

The Office of Fair Trading (OFT) has the power to investigate a proposed merger of businesses in the same sector.

It will look at deals which might create a “share of supply” of more than 25% in the UK or involves an acquisition of a target company with a UK turnover of more than £70m.

The purpose of the investigation is to establish whether there is a reasonable prospect that the merger might result in a significant lessening of competition within the UK market.

With that background, on May 14, 2013 a decision was reached by the OFT relating to the proposed acquisition by of Kayak.

Priceline is a US OTA (Online Travel Agency) allowing bookings for hotels, airlines and car hire and operates under the brands,, and The main brand in the UK is

Kayak, meanwhile, is a metasearch website offering a price comparison service which allows customers to search and to compare prices for hotel rooms, airline tickets, package holidays and rental cars.

The OFT investigation was to see whether the merger fell foul of the “share of supply” test by resulting in more than 25% of the UK market being covered by the new merged entity.

The OFT decided not to refer the proposed merger to the Competition Commission and concluded that it did not give rise to competition concerns resulting from the merger, which was unlikely to affect fair competition in the online advertising of hotels and car hire and other travel products to UK customers.

In reaching this conclusion, the OFT carried out an interesting analysis of the current marketplace for online travel bookings.

In addition to making direct online bookings with travel service providers, customers can use OTAs’ online search and booking services who then act as intermediary or agent with the travel service provider.

In this way, OTAs such as, Expedia and act as a distribution channel for the service provider which allows customers to search and make bookings.

Compared with this, metasearch sites, such as Kayak, Trivago, Skyscanner and Travel Supermarket, offer multiple prices by aggregation with OTAs and service providers’ own sites.

Accordingly, OTAs and metasearch sites are not in the same market, and like other price comparison websites Kayak did not have a booking facility and was a search rather than a booking service; therefore the services of Kayak would not overlap with those of Priceline.

By an analysis of sales volumes, the OFT established that Priceline’s share of supply was of the order 25%/35% to 35%/45%, with Kayak’s share negligible at less than 2%.

There was therefore little prospect of the online advertising of travel services lessening on a competition law basis by the merger.

A negligible change also applied to online travel searches. Again there was a very small change resulting from the merger in the market of online advertising for hotel or car hire.

The OFT also concluded that while Priceline might be able to use Kayak to detect “price parity deviations” the merger would not strengthen their position to do so and would not therefore affect fair competition.

On the concept that Priceline could use Kayak’s website unfairly to drive bookings to Priceline’s offerings, it was not felt that Kayak was a “must have” website and there was sufficient competition in the market place.

On a further point, the OFT did not consider that through Kayak, Priceline could increase advertising fees/pay per click rates charged to OTAs given Kayak’s small share of supply.

Competition law is complex and this decision shows that an informed and detailed analysis of the online market has been carried out.

Given the findings, it now seems open for OTAs to consider acquiring metasearch providers as a means of expanding their business.

Even where this might create a share of the UK market in excess of 25%, the market sector differentiations are unlikely to give rise to competition law concerns.

Ian Skuse, Piper Smith Watton, is a specialist in travel sector mergers, acquisitions and regulatory issues

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