Antitrust Alert: Connecticut Attorney General Challenges Competitor Contacts

On April 1, 2010, the Connecticut Attorney General's Office announced an agreement with the La Quinta hotel group to cease contacts with competitors that the Connecticut Attorney General, Richard Blumenthal, characterized as "a wake-up call to the entire hotel industry -- signaling that call-arounds to set room prices are illegal and must be stopped."  Under the settlement, La Quinta agreed to end "call-arounds," an alleged industry practice by which competing hotels in a particular geographic area exchanged current room rate and occupancy information, which the AG asserted could be used to fix prices.

The agreement with La Quinta characterized the practice of "call-arounds" as prevalent in the hotel industry and a potentially serious antitrust concern.  The AG asserted that by sharing this rate and occupancy information, participating hotels were able to raise or stabilize the rates charged for their hotel rooms. 

Under the agreement, La Quinta agreed to end call-arounds at all of the company's hotels nationally.  This prohibition, however, does not prevent La Quinta hotels from reviewing commercially available reports and similar information, communicating with other hotels on behalf of a specific guest seeking to relocate, or communicating with hotels regarding the ability to accommodate guests in the event of a state of emergency or natural disaster.  The Connecticut AG investigation remains ongoing with respect to other, unnamed hotels.

The Connecticut AG investigation and agreement with La Quinta are a reminder both of the role of the states as antitrust enforcers and the need to scrutinize carefully any contacts or information exchanges with competitors.  Where, as here, the exchange involves direct contacts and the provision of current pricing and utilization information, the outcome is almost certain to be a government antitrust challenge.

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Kathryn M. Fenton

Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter.  Please visit our Publication Request form to add your name to our distribution list.