The Office of Fair Trading is investigating whether online travel agents Booking.com and Expedia and hotel group Intercontinental Hotels Group (IHG) have broken competition law.
The regulator's provisional findings are that separate agreements made by Booking.com and Expedia with IHG infringed competition law by limiting price competition and creating barriers for other firms to expand.
The three companies have three months to respond to the allegations. If the OFT concludes that there have been breaches of the Competition Act, it can impose penalties of up to 10 per cent of a company's turnover.
While OFT had thus far limited its investigation to a small number of major companies, it added that the issue is likely to have wider implications as the alleged practices were "potentially widespread in the industry".
Clive Maxwell, OFT chief executive, said: "We want people to benefit fully from being able to shop around online and get a better deal from discounters that are prepared to share their commission with customers."
The OFT investigation began in September 2010, after discount website Skoosh.com complained that it was being put under pressure to maintain a standard price rather than share its commission with customers. The arrangement between Booking.com and IHG was still in place, while Expedia allegedly violated rules between October 2007 and September 2010, the OFT stated.
A report by the BBC said hotel bookings through online travel agents in the UK totalled approximately £849m in 2010. The practice of keeping prices at a pre-set level is called ‘rate parity’, meaning a customer might look at several websites and see the same prices advertised. Where there is very little variation in prices, a website can claim that its prices are the ‘cheapest'.
Both Expedia and IHG have argued that the arrangements complied with the law. A statement from Expedia said: "Expedia remains committed to ensuring that it provides consumers with the widest possible choice of travel options at competitive prices and will seek to safeguard its ability to continue to do so in relation to the current regulatory process.”
IHG said its arrangements with online booking agents were "compliant with competition laws and consistent with the long-standing approach of the global hotel industry".
Booking.com's parent company, Priceline, said it would contest the allegations "vigorously", claiming that it did not control hotel pricing.