The Competition and Markets Authority (CMA) has launched an investigation into several leading hotel chains and a prominent hotel data analytics provider, focusing on suspected anti-competitive conduct within the hotel accommodation services market.
The Probe’s Focus and Potential Legal Infraction
The CMA’s investigation targets major players in the hotel industry, specifically Hilton, including Hilton Worldwide Limited and its ultimate parent company Hilton Worldwide Holdings Inc.; IHG, including InterContinental Hotels Group Plc.; and Marriott, including Marriott Hotels Limited and its ultimate parent company Marriott International, Inc. The probe also includes the hotel data analytics tool STR, owned by CoStar, including CoStar UK Limited and its ultimate parent company CoStar Group, Inc. All four businesses are under investigation.
The central issue driving the inquiry is whether these competing hotel chains used the STR data analytics tool to share competitively sensitive information. “Competitively sensitive” information refers to data that can reduce uncertainties in the market and influence the competitive strategy of participating businesses. Such information exchange could potentially constitute an infringement of Chapter I of the Competition Act 1998, which prohibits agreements and concerted practices that prevent, restrict, or distort competition.
The Role of Technology and the CMA’s Position
The CMA acknowledges that data analytics tools and algorithms are widespread and can bring substantial benefits. These technologies can enhance commercial decisions, foster intense competition, lower costs, and facilitate faster price changes to better match supply and demand in markets. Furthermore, algorithmic pricing solutions can make sophisticated commercial tools accessible to smaller businesses, enabling them to grow, innovate, and compete more effectively.
However, the CMA also highlights that the misuse of such technologies presents distinct legal risks. When rival businesses share competitively sensitive information—including through a third-party data analytics provider—it reduces the competitive uncertainty that normally exists about each other’s actions. This dampening of competitive forces makes it easier for companies to predict competitors’ behavior and coordinate their own actions. Such reduction in uncertainty can affect how strongly companies compete and, consequently, harm consumers through higher prices, less innovation, and reduced choice. This problematic outcome undermines the core principles of a competitive market.
Important Implications for Businesses and Service Providers
The use of pricing algorithms is widespread and can bring gains, but it requires careful use to remain compliant with competition law. A prior CMA case involving online sales of posters and frames demonstrated how companies could use software to implement or monitor price-fixing agreements, leading to fines and director disqualification.
It is critical that businesses ensure they are not sharing confidential information with competitors, whether directly or indirectly, such as through a pricing consultant or pricing software. Additionally, businesses must verify that any pricing advice they receive is not influenced by confidential information from their competitors, even if they do not receive such information directly. In general, businesses should be cautious when using an algorithm that is also used by their competitors. If a business could reasonably foresee that a pricing recommendation might be drawing on confidential competitor information—even without being explicitly told—it may still be breaking the law.
Practices that are illegal offline, such as sharing commercially sensitive information, are equally illegal online. Not knowing what an algorithm is doing is not a valid excuse; both end users and suppliers must understand how the tools and technologies they employ or supply work and ensure they are legally compliant. Furthermore, providers of pricing services can also be held accountable for breaking competition law, for example, if they give pricing recommendations to rival businesses that are based on each other’s confidential information.