FTC Targets Booking Holdings in Hotel-Booking Advertising Probe

The Federal Trade Commission is examining Priceline’s relationship with Guest Reservations, a third-party booking service whose advertisements and websites may have caused some travelers to believe they were dealing directly with hotels, Reuters reported Wednesday, citing two people familiar with the matter.

The investigation adds a regulatory risk for Booking Holdings, the parent of Priceline, Booking.com and other travel brands. The company has already disclosed that FTC staff notified Priceline in July of plans to recommend a complaint involving Priceline and one of its business-to-business partners.

Booking Holdings said in a regulatory filing that the potential claims concern matters including disclosures, fees, billing and customer-service practices. The company said it disagrees with the FTC’s position and has been discussing a possible resolution with the agency.

Reuters identified the affiliate involved as Guest Reservations. One person familiar with the matter told Reuters that potential penalties could exceed $500 million. Priceline declined to comment to the news organization, while the FTC confirmed that an investigation was underway. Guest Reservations did not immediately respond to Reuters’ request for comment.

At issue is how third-party hotel reservation services present themselves to consumers searching online for accommodations. Reuters reported that regulators are considering whether the practices fall under federal rules designed to prevent businesses from impersonating other companies.

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Guest Reservations has been the subject of more than 1,000 complaints submitted to the Better Business Bureau, according to Reuters. Some consumers said they believed they were booking directly with a hotel before encountering additional charges or customer-service problems.

The scrutiny reflects broader concerns about how online travel intermediaries market hotel rooms. Travelers searching for a specific property can encounter advertisements and booking pages operated by companies that have no direct ownership connection to the hotel, making clear disclosure of the booking provider important.

Read more: Booking Loses EU Court Challenge Over Blocked ETraveli Acquisition

The FTC has previously pursued hotel reservation businesses over allegations that their websites gave consumers the impression they were booking directly with properties. The agency has also examined how online advertisements and business impersonation can mislead consumers.

Hotel operators have raised similar concerns. Laura Lee Blake, chief executive officer of the Asian American Hotel Owners Association, told Reuters that hotels can end up fielding complaints arising from reservations made through third-party services. The American Hotel and Lodging Association also told Reuters that misleading representations involving hotel rates, room availability and relationships between booking sites and properties remain an industry concern.

The current investigation comes as the FTC increases attention on deceptive online advertising. FTC Chairman Andrew Ferguson told Reuters in September that the agency was looking at misleading advertisements, including those that direct consumers to websites appearing to belong to hotels.

For Booking Holdings, the eventual cost remains uncertain. The company has warned investors that the FTC matter could lead to monetary penalties, damages or changes to business practices if regulators pursue a case or the parties reach a settlement.

Reuters first reported the identity of the affiliate, details of the FTC scrutiny and the potential size of the financial penalty. Booking Holdings’ previous regulatory disclosures separately acknowledged the FTC matter and the possibility of financial and operational consequences.