Judge Orders Arbitration in Travelocity Price-Fixing Class Action MDL

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U.S. District Judge Jane J. Boyle ruled on Friday that plaintiffs involved in class action lawsuits accusing online travel companies of conspiring with hotel companies to fix the price of hotel rooms must arbitrate their disputes against Travelocity.com LP under its user agreement terms.

In his June 14 decision, Judge Boyle said that since consumers must agree to Travelocity’s user agreement before booking a hotel room, the plaintiffs are bound to the clause in the agreement that requires arbitration for disputes involving less than $10,000. Other defendants in the case include Orbitz, Priceline and Hotels.com.

According to dozens of class action lawsuits that were consolidated into multi-district litigation in December, the plaintiffs allege that certain travel companies engaged in anticompetitive practices in violation of U.S. antitrust law. They alleged that hotel companies and travel companies conspired to set hotel room prices, agreeing not to resell hotel rooms below the fixed price. The online travel websites would deceive customers by advertising the “best” or “lowest” prices, even though all of the travel companies offered the same price for the hotel room.

The plaintiffs in the class action lawsuit alleged that Travelocity had failed to show that the arbitration agreement was valid, and that the company failed to prove that the consumers had consented to the user agreement.

Judge Boyle determined that the plaintiffs had not presented evidence to suggest that they should not be bound by the user agreement terms. On the other hand, Travelocity had been able to provide adequate evidence to show that the plaintiffs had assented to the user agreement, including its class action lawsuit waiver and arbitration provision. Judge Boyle found that the fact that consumers were required to assent to the user agreement before making a hotel booking is sufficient proof of consent.

In the class action lawsuit, the plaintiffs argued that, even if they had consented to the agreement, the user agreement is unenforceable because it is a “browsewrap” agreement that allows users to download software before assenting to its terms. Judge Boyle found that this user agreement was not “browsewrap” because it was impossible for plaintiffs to complete their transactions on the Travelocity website without first assenting to the user agreement. Judge Boyle clarified: “Since the user agreement was conspicuously presented and plaintiffs assented to the user agreement by clicking the ‘Accept’ button to complete each online transaction, it is a valid . . . agreement.”

According to the plaintiffs, the arbitration clause is unenforceable because it could be modified at any time. Judge Boyle rejected this argument because the user agreement stated that customers would be bound by the terms of the agreement that was in place at the time of booking. The plaintiffs argued that the arbitration clause puts an economic burden on the plaintiffs that would prevent them from arbitrating their antitrust claims individually. Judge Boyle countered their argument, claiming that Travelocity indicated it would pay the costs for proof and witnesses provided at the arbitrator’s discretion. Further, under the American Arbitration Association’s consumer arbitration rules, Travelocity is required to pay for daily arbitrator fees.

Judge Boyle also approved Travelocity’s motion to strike any claims made by absent members of the class action lawsuits based on their Travelocity transactions made on or after February 4, 2010.

This online hotel price-fixing MDL combines class action lawsuits that were filed in California and Texas last year, as well as more than 20 potential tagalong cases against travel companies and hotel chains.

The consolidated case is In re: Online Travel Company Hotel Booking Antitrust Litigation, Case No. 12-cv-03515, in the U.S. District Court for the Northern District of Texas.

Plaintiffs are represented by Hagens Berman Sobol Shapiro LLP, Stanley Iola LLP and Federman & Sherwood, among others.

UPDATE: A federal judge dismissed the online hotel price-fixing class action lawsuit on Feb. 10, 2014.