By Jody Godoy and Doyinsola Oladipo
Oct 7 (Reuters) - The US Federal Trade Commission is gearing up to take action against owner Booking Holdings over online ads that appear to direct consumers to a hotel's site, but in reality send them to a third-party site where they are often charged extra, two sources familiar with the matter told Reuters.
The FTC has been looking into Booking's relationship with Guest Reservations, a third-party website that advertises stays at specific hotels, the sources said.
The case could carry more than $500 million in potential penalties, one of the sources said.
The sources requested anonymity as they were not authorized to speak publicly on the matter.
The agency is considering whether Guest Reservations' websites, which often charge higher prices and fees for hotel rooms, violate a rule against impersonating other businesses, along with other potential violations regarding fees, the source said.
The FTC has continued its focus on issues that drive up the cost of living for Americans, as President Donald Trump's approval rating remains at all time lows amid dissatisfaction with the US war on Iran which has driven up fuel costs.
The agency has been investigating misleading ad practices, FTC Chairman Andrew Ferguson said during an interview with Reuters in September, including ads that lead to sites that appear as if they are run by hotels.
"For tens of millions of Americans, they don't notice until they've checked out and they've paid exorbitant fees," he said at the Reuters Momentum AI event in Austin.
Booking Holdings disclosed in August that FTC was considering suing Priceline and an affiliate over disclosures, fees, customer support and billing practices, without naming the affiliate or describing the practices. The company said it was in talks with the FTC to resolve the matter.
A Priceline spokesperson declined to comment.
An FTC spokesperson confirmed the investigation but declined to comment further.
Guest Reservations has been the subject of more than 1,000 consumers' complaints to the Better Business Bureau, many of whom said they believed they were booking directly with hotels. Consumers complained of surprise fees and unresponsive customer service representatives.
Booking supplies hotel room inventory to Guest Reservations through Priceline Partner Solutions, according to an ongoing lawsuit against the companies filed by San Francisco.
A spokesperson for Guest Reservations did not immediately respond to a request for comment.
The company's site says that it uses hotel trademarks or information only to help customers book rooms.
TRAVEL SITES DRIVE BUSINESS, COMPLAINTS
Third-party booking sites that confuse consumers by misrepresenting their affiliations with hotels or advertising misleading rates and inventory have been a persistent problem for years, said a spokesperson for the American Hotel and Lodging Association, an industry trade group.
Major hotel chains have for years sought to drive more customers to book directly, allowing hotels to avoid commissions and transaction fees associated with intermediaries. And yet aggregator sites like those run by Booking and Expedia Group are a major source of business for chains like Marriott International and Hilton.
Hotel owners and employees are often the ones who have to deal with guest complaints when third-party bookings go wrong, said Laura Lee Blake, CEO of the Asian American Hotel Owners Association. The association represents nearly 20,000 hotel owners in the US.
Blake said that she has experienced first-hand making a booking on a third-party website believing that she was booking directly through the hotel.
“If someone who works in the hotel industry can make that mistake, imagine how easily the average traveler can be confused,” she said.
Hilton, Marriott and InterContinental Hotels Group declined to comment. Hyatt did not respond to a request for comment.
FTC FOCUSED ON CONSUMERS
Ferguson has embraced the FTC's consumer protection powers as a way to remedy alleged harms by tech platforms, as the US grapples with how to regulate artificial intelligence without hampering innovation.
Consumer protection cases bring quicker results than antitrust investigations, which can plod on for years while the markets change, Ferguson said at an event at Georgetown University in September.
The FTC's investigations into misleading ads have prompted the agency to consider new rules on what online platforms must do to combat misleading ad practices.
(Reporting by Jody Godoy and Doyinsola Oladipo in New York; editing by Chris Sanders and Nick Zieminski)
