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Consumer Alert: Hotel Room Reservation Resellers Settle FTC Charges

Hotel Room Reservation Resellers Settle FTC Charges

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Consumers Making Hotel Room Reservations Allegedly Led to Believe They Were Dealing Directly with Hotels 

Consumers Not Adequately Notified They Would Be Charged Immediately When Reservations Booked, Instead of After Arrival at Hotel

The Federal Trade Commission announced that Utah-based third-party hotel room reservation resellers have settled FTC charges that hotel room reservation resellers misled consumers through ads, webpages, and call centers which led consumers to mistakenly believe they were reserving hotel rooms directly from the hotel, and failed to adequately tell consumers that their credit cards would be charged immediately, rather than after they arrived at the hotel.

Hotel Room Reservation Reseller Defendants Barred from Further Deceptive Conduct

The FTC’s proposed order settling the FTC’s complaint will prevent the Defendants from further deceptive conduct in the future and specifies changes the Defendants must make to ensure consumers have the information they need to make informed hotel room reservation decisions.

The Hotel Room Reservation Reseller Defendants

According to the FTC, Reservation Counter, LLC and its two parent companies, Partner Fusion, Inc. and TravelPASS Group, LLC, sell hotel room reservations, or bookings, to consumers nationwide. The entities get hotel room inventory primarily through other online travel agencies (e.g., Expedia, Priceline, and Orbitz) and then market the rooms themselves.

Further, most of the Defendants’ hotel room reservation bookings result from search engine ads, which appear in response to consumers’ online searches for hotels. When consumers click on the link in one of the Defendants’ ads, they are sent to webpages owned by Reservation Counter and its parent companies which feature information about the hotel searched. Consumers can book hotel rooms online or by calling the phone number listed in the companies’ ads and webpages and speaking with sales agents at call centers controlled by the Defendants.

The FTC’s Complaint Against the Hotel Room Reservation Resellers for Permanent Injunction & Other Equitable Relief

According to the FTC’s complaint, the ads, webpages, and call centers create the impression that consumers are booking rooms directly with the advertised hotel, when, in fact, consumers are booking hotel rooms through the Defendants, not the hotel. According to the complaint, consumers who book through the Defendants may not be eligible to receive reward points or other hotel loyalty program benefits, and hotel policies, such as cancellation and refund policies, may not be the same as when booking directly from the hotel.

When booking hotel rooms through the Defendants, consumers must provide credit card or other payment information. In many instances, consumers are charged immediately for the cost of the hotel room, plus applicable fees and taxes, rather than after arriving at the hotel. According to the complaint, consumers are not adequately informed that they will be charged immediately.

The FTC’s Proposed Order Settling the Charges Against the Hotel Room Reservation Resellers

The FTC’s proposed order settling the charges prohibits Reservation Counter and its parent companies from making misrepresentations about their affiliation with hotels. The proposed order expressly prohibits the companies 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. It also bars them from placing their telephone number directly near a hotel name, logo, or address in a manner that misrepresents that callers would be contacting the hotel directly.

In addition, the FTC’s proposed order requires the Defendants to disclose material information, including the total cost of a hotel room and when they will charge a consumer’s payment card. The order also requires the companies to disclose that callers to any of their hotel reservation call centers have reached an independent, third-party travel agency and to monitor their call centers to prevent misrepresentations.

Hotel Room Reservation Reseller Complaint: FTC v. Reservation Counter, LLC, TravelPASS Group, LLC & Partner Fusion, Inc

According to the FTC’s complaint, filed in United States District Court, District of Utah, Central Division:

Defendants Reservation Counter, TravelPASS, and Partner Fusion have operated as a common enterprise while engaging in the [alleged] deceptive acts and practices . . .. These [D]efendants have conducted the business practices . . . as interrelated companies that have common control, officers, business functions, employees, and office locations. Each of these [D]efendants is jointly and severally liable for the acts and practices alleged below. 

Defendants sell hotel room reservations, or bookings, to consumers. They obtain hotel room inventory primarily through affiliate network programs sponsored by first-tier online travel agencies . . . such as Expedia, Priceline, and Orbitz, but they advertise and market the available hotel rooms through their own advertisements, websites, and call centers. 

Defendants advertise through online search engine marketing, using search engines such as Google, Yahoo, and Bing. A substantial majority of Defendants’ search engine advertisements are designed around a specific hotel brand name and a specific city. About 95 percent of Defendants’ bookings are made through search engine marketing. 

When a consumer clicks a link in one of Defendants’ search engine ads, the consumer is directed to websites owned and controlled by Defendants, including ReservationCounter.com, ReservationDesk.com, and Reservation-Desk.com. 

By following the link provided in Defendants’ advertisements, consumers can book hotel rooms online, using desktop, laptop, notebook, and tablet computers, and smartphone mobile devices. 

Consumers also can book hotel rooms by calling the telephone number listed in Defendants’ advertisements and websites. Consumers using smartphone mobile devices can “click-to-call” a sales agent merely by clicking a link in the search results ad. Defendants have handled sales calls (and customer service calls) through their own call centers, located in several countries in Central America, since July 2012. 

The phone number listed in Defendants’ search engine advertising acts as a customer identifier that allows the sales agent to access the caller’s online session. Thus, at the time the agent answers the call, the agent knows the specific hotel searched or last visited by the consumer. 

At the time of booking, Defendants send the reservation and payment information, through Internet transmission, to the applicable [online travel agency], which processes the payment and transmits the reservation information to the booked hotel. 

Defendants charge consumers for the amount paid to the hotel as well as amounts they and the [online travel agency] retain as fees for their services. Consumers also are charged a “tax recovery fee” to cover the anticipated taxes for the hotel room reservation. 

During most or all times material to [the FTC’s] [c]omplaint, Defendants processed most hotel bookings using a business model in which the customer prepays the cost of the hotel room immediately at the time of the booking and not after the customer arrives at the hotel. In contrast, for guests booking rooms directly with a hotel, many hotels frequently require credit card or other payment information at the time the reservation is made in order to hold the reservation, but do not actually charge the consumer for payment of the hotel room, plus applicable fees and taxes, until after the consumer has arrived at the hotel. 

Defendants’ hotel [room] reservation advertising and marketing practices . . . create the impression that consumers are booking hotel rooms directly through the advertised hotel, and thus, that reservations made through Defendants are subject to the same terms and policies as those applicable to consumers who book hotel rooms directly with the hotel. However, consumers who are members of the advertised hotel’s loyalty or reward program are not eligible to receive reward points or other program benefits when they book hotel rooms through Defendants, and the available hotel policies, such as payment or cancellation policies, are not necessarily the same as those for consumers who book their reservations directly through the hotel. Also, some special rates may not be available to consumers who book hotel rooms through Defendants, such as rates for weddings, conferences, or other special events where the hotel offers a discount rate for a specific block of rooms. 

An Example of a Hotel Room Reservation Reseller Search Engine Advertisement

The FTC’s complaint provided [t]he following . . . example of a search engine advertisement that Defendants placed during the relevant period. A consumer who typed the phrase “Hilton Birmingham Alabama” into a Yahoo search engine box would see the following search results: 

Hotel Room Reservation Search Engine Advertisement ExampleThe first and second listed results are paid advertisements for hotel reservation websites owned and operated by Defendants. Each advertisement conveys the impression that clicking on the advertisement will take consumers to websites owned and operated by or directly for the advertised Hilton hotel located in the Birmingham, Alabama area. 

The Hilton hotel name appears prominently in the headline of each advertisement in large bold lettering:

“Hilton Birmingham Alabama – Hilton.ReservationCounter.com”

Hilton Birmingham Al – 8 Perimeter Park South, Birmingham

The hotel address and links to information about the advertised hotel, such as amenities, map and directions, and photos, are included in each advertisement. 

The second line of each advertisement – “ReservationCounter.com/Hilton” and “Reservation-Desk.com/Hilton” – is the “display URL.” In the above examples, Defendants added the venue-specific detail “Hilton” to the display URL. Although these display URLs include reference to Defendants’ URL, the ad conveys the impression that the reference to “Reservation Counter” or “Reservation-Desk” refers to the centralized booking center operated by or for the Hilton hotel chain. 

Hotel Room Reservation Reseller Online Hotel & Call Center Reservation Practices

The FTC’s complaint also details the online hotel and call center reservation practices of the hotel room reservation reseller defendants, as well as the Defendants’ violations of the FTC Act for “deceptive representation that Defendants are the advertised hotel” and “deceptive failure to disclose material information regarding prepayment charges.”

Click FTC’s Proposed Order for the details of the FTC’s Proposed Order settling charges against the hotel room reservation reseller Defendants.  

Source: Federal Trade Commission (https://www.ftc.gov).
Kehoe Law Firm, P.C.