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The WSJ cares for travelers but not too much: The difference between “competition” and “misleading competition”

· December 29, 2017

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Today the Wall Street Journal Editorial Board published an op-ed accusing Google and major hotel chains of undercutting competition to the detriment of consumers seeking to book a hotel room online.  It is laudable and kind for the WSJ to care about the millions of Americans travelling during these holidays.  However, it is unfortunate that the op-ed lacks rigor and fails to identify one of the real challenges that travelling consumers face when booking a hotel room online: misleading practices by online travel agencies (OTAs).

The WSJ aptly notes that “more than 100 million Americans are expected to travel during the holidays, and many will search for lodging online.” And the truth is that the Internet has brought about extraordinary benefits to travelers.  Consumers can now search for hotel rooms online, and benefit from fierce competition online, currently led by Priceline and Travelocity (not Google, as the WSJ seems to imply).

But what the WSJ fails to explain to its readers is that as part of the U.S. Federal Trade Commission (FTC)’s efforts to ensure that consumers can make informed choices when booking online, the FTC filed a complaint against several companies for misleading consumers attempting to book a hotel room through their websites. According to this U.S. consumer protection agency, online reservation counters allegedly led travelers to believe that they were dealing directly with hotels, when in fact they were not.

What is even more surprising is that the well-reputed WSJ’s op-ed ignores that on December 22, just when many Americans were probably beginning to travel to meet with their families and receive Santa’s presents, the defendants in the FTC case decided to settle.  

If the WSJ cared so much for travelling consumers, it might have explained to its readers that some online reservation counters engage in misleading competition.  And that thanks to the FTC settlement, companies will be barred from “using a hotel name or logo in any search engine ad, URL, website, webpage, or any other type of advertising in a misleading way.”  So, these companies will not be able to include e.g., “Hilton” in their URLs, to create the impression with consumers that they are dealing directly with such hotels. The FTC settlement also prohibits these companies from including a phone number “directly near a hotel name, logo, or address in a manner that misrepresents that callers would be contacting the hotel directly.”  In fact, these companies will have to disclose that they are independent third-party travel agencies as well as the total cost of the hotel rooms as well as when consumers will be charged.

In short, thanks to this FTC settlement, companies offering consumers online booking services will have to stop engaging in misleading competition, compete instead on the merits, and ensure that consumers make informed choices when booking online.

But none of the above is explained in the WSJ op-ed.  Rather, the op-ed follows the NewsCorp playbook of blaming major Internet brands for everything and asserts that Google and hotels are now working together to stifle competition.  To substantiate its accusations, it seems that the WSJ is of the opinion that Google should not protect consumers against misleading use of brand names, at least when it comes to online advertising.  In addition, the op-ed asserts that the search engine requires OTAs to provide Google with proprietary information — a misleading assertion given that Google only requires standard information provided to partners in the travel industry like availability, descriptions and pricing.

In other words, what the WSJ neglects to tell its readers is that Google’s policies are designed to prevent competing advertisers from misleading consumers. These policies are in line with the FTC’s willingness to allow consumers to make informed choices and ensure transparency in the services Google provides.

In fact, the WSJ contradicts itself and recognizes that Google’s services are beneficial for competition by acknowledging that “Competition from Google’s meta-search could also spur OTAs to improve their services.” And yes, that is as it should be.  By increasing competition, Google services benefit consumers since hotels are able to offer rooms to travelers at a lower cost by saving the commissions paid to OTAs.  So OTAs have no alternative but to improve their services to compete. As a result, either through price drops or enhanced services, consumers are better off, which is the essence of competition policies themselves.

So for the new year, let’s make some competition-related resolutions, and hope that the WSJ’s Editorial Board gets the facts straight.

Happy 2018!

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.