Priceline Faces $1 Billion Fine After Hotel Guests Were Tricked Into Paying Up To 85% More For Rooms

You search for a hotel, click what looks like its reservation page, and book a room—only to discover you’ve gone through a middleman charging hundreds of dollars more per night. That’s the deception alleged against Guest Reservations, a Priceline partner whose advertised rate could be up to 85% higher than booking directly. Now Priceline’s parent has recorded a $1 billion accounting charge toward a possible Federal Trade Commission settlement involving the partner’s practices, with the potential penalties and consumer refunds still being negotiated. A refundable room at San Francisco’s Palace Hotel was $419 on Marriott’s website. Guest Reservations wanted $775 for a comparable room with the same cancellation deadline. And the city’s lawsuit says the booking site was designed to make travelers think they were dealing with the hotel directly. The company supplying the rooms was Priceline, and its parent Booking Holdings which also owns Booking.com, has taken a $1 billion accounting hit while negotiating a possible regulatory settlement for its involvement in intercept guests who had already chosen a hotel, making them think they’d reached the hotel’s own site, and charging them more – and making it difficult to undo the purchase when they discover what happened. San Francisco’s suit includes a Google search for “palace hotel sf” on an iPhone. The top sponsored result displayed palacesanfrancisco.guestreservations.com, above Marriott’s own hotel website. Clicking led to a page devoted to the Palace Hotel. The city says the small “An independent travel network” on the site was easy to miss and ambiguous. “Guest reservations” sounds like a department of the hotel you’re trying to book. Put the property’s name in front of it, add hotel photos, and a traveler can think they’ve arrived at the hotel’s guest reservations department. The city compared prices within minutes of each other on July 1 for a July 8 stay. These were Marriott’s public nonmember rates, including taxes: King Room Cancellation Terms Marriott Direct Guest Reservations Markup Refundable for one day after booking $381 $595 56% Refundable until July 5 $419 $775 85% A separate investigation found a two-night stay at the Westin Denver Airport cost $237 more through Guest Reservations than booking the same stay directly. Guest Reservations said it clearly identifies itself as an independent platform, complies with Google’s advertising rules, and discloses its taxes and service fees before purchase. Customers also describe trouble getting refunds after discovering the intermediary. And booking through a third party means giving up hotel points and elite benefits, along with the ability to deal directly with the property when plans change. Guest Reservations isn’t owned or operated by Priceline. Priceline Partner Solutions was reportedly its exclusive hotel inventory supplier. Their operation furnished the hotel information, booking technology and payment processing, and earned revenue from completed reservations. The city’s case also targets BookOnline.com. It alleges Booking knew how the sites were acquiring customers and continued helping them sell rooms. Booking responded that it takes consumer protection seriously and believes the lawsuit lacks merit. One example of Priceline’s involvement comes from Seth Kugel’s New York Times investigation. An 85-year-old woman searching for Bologna’s Grand Hotel Majestic reached Guest Reservations and requested an eight night standard room stay. She was charged $16,559 for a suite, including $4,276 in taxes and fees. When she disputed the charge with American Express, Priceline Partner Solutions was the merchant of record and successfully sought to have the charge reinstated. Guest Reservations later told the paper it had issued her a refund. Priceline told the Times that fewer than 0.09% of Guest Reservations transactions generated complaints, that partners must comply with laws and contractual obligations, and that it takes action when it identifies violations. A low complaint rate doesn’t tell us how many people were misled. Some never discover it. Others blame the hotel. Many may think they have no recourse. Most consumers do not complain when they’re unhappy (or complain to friends and family). The odds that a complaint reaches Priceline as supplier of the inventory seem low. And they’re saying they’re getting complaints… not what they did with those! In its latest quarterly filing, Booking recorded: A $900 million reduction in revenue. A separate $100 million loss in general and administrative expenses. Booking says the FTC could seek even more. A negotiated agreement would likely include payments to the agency, money back to U.S. consumers, and changes to Priceline’s practices. There are also civil penalties for qualifying rule violations, with a current ceiling of $53,088 per violation. The government has a straightforward argument about the alleged sales process: a reasonable customer gets misled by the appearance of an ad and booking page, while the booking site says guests should have read the disclaimer more carefully. The site apparently was literally designed to create the wrong impression among customers. The FTC’s business impersonation rule covers falsely posing as another company or misrepresenting an affiliation, including by implication. The government likely needs to show that Priceline knew about the deception and participated in it or had authority to control it. But there are several defenses: Charging more isn’t illegal. Travel agencies can charge service fees, and customers can buy expensive rooms. Guest Reservations says it discloses its role and charges. The actual booking screens and phone calls have to establish deception. It doesn’t appear that Guest Reservations websites offer any value add of any kind. The question is going to be whether they were in fact actively trying to generate bookings through deception. Supplying rooms alone doesn’t make Priceline responsible for every advertisement of them. It can argue that it provided ordinary distribution services and didn’t design or control the misleading sales pitch. The FTC declined to adopt a broad provision making suppliers liable for furnishing the tools of impersonation. So the FTC needs to demonstrate Priceline’s complicity. The FTC has to establish its authority to collect the money. The Supreme Court limited the agency’s general route to obtaining refunds in 2021. The amount of harm is unclear. Travelers could have gotten their rooms for less but generally did receive the stay they booked, at a price they were willing to pay. I wouldn’t make every wholesaler liable whenever a reseller behaves badly. It’s not yet clear exactly what Priceline knew and when they knew it. But I infer from taking a billion dollar accounting charge that the evidence against them is significant. Online travel agencies can earn their commissions by helping customers find the hotel they want, comparing options and searching for better prices (despite rate parity rules). I’ve written about the financial incentive to make comparison shopping harder. Here, it seems the traveler had already chosen the hotel, was looking for the hotel site to go ahead and book it, and the middlemen got paid by confusing them into thinking that’s what they were doing. Topics on this page