• FTC Files Complaint in U.S. District Court for the District of Utah Against Misleading Online Hotel Room Rental Operation
  • April 2, 2018 | Author: Howard J. Smith
  • Law Firm: Olshan Frome Wolosky LLP - New York Office
  • The Federal Trade Commission recently filed a complaint in the United States District Court for the District of Utah against three defendants who purchase hotel room inventory through online travel agencies (“OTAs”) and then market those hotel rooms to consumers on the internet through search engine marketing such as Google.

    In this particular case, the defendants bid on keywords that were specific city and hotel names. The FTC asserted that the defendants’ practices created the impression that consumers are booking the hotel rooms directly through the advertised hotel as opposed to a third party. As a result, the FTC alleged that a consumer would assume that reservations made through the defendants would be subject to the same terms and policies as those consumers that book directly with the hotel in question. That is not the case. In fact, the consumer must fully prepay the room rate and is not eligible to take advantage of hotel loyalty programs and the like.

    As is often its practice, the FTC filed with its complaint a Stipulated Order for Permanent Injunction with the defendants. By its terms, the defendants agreed to a permanent injunction of the deceptive behavior and further agreed to disclose to consumers that they are not affiliated with the hotels and also agreed to report to the FTC regarding their compliance with the settlement terms.

    Takeaway: A reseller of the products or services must not create the impression that consumers are purchasing the product or service directly from the source and must use prominent disclosures to inform consumers prior to the time they purchase that their purchase will not be subject to the same terms and policies as those consumers that book directly with the source.