Mark Pestronk
Q: Our travel agency acts as a host to many independent contractors. If an IC with his or her own website offers a booking capability that deceives consumers in some way, could we, as a host, be liable for the deception? If so, what should we do to prevent us from being liable?
A: Until now, I would have said that a host agency is never responsible for the deceptive acts of an IC, as they are separate businesses. However, a recent court case could well alter my view once a court finally rules on the issues.
In July, the city attorney of San Francisco sued Booking Holdings along with the operators of the websites www.guestreservations.com and www.bookonline.com under California Business and Professions Code section 17200, also known as the Unfair Competition Law, which prohibits any unlawful, unfair or fraudulent business acts or practices, including misleading advertising.
Those two websites are accused of deceiving consumers into believing they are booking directly with their desired hotel instead of a third party by using the desired hotel's name as part of the URL and purchasing search engine placement ahead of the hotel's own website.
Booking Holdings' Priceline Partner Solutions has an affiliate program that shares certain features with host agencies' programs. Priceline supplies the agency with an API allowing the agency to access hotel rates and commissions, and then it takes a fee or cut of the commissions.
The city attorney alleges that "Booking Holdings knows about the website defendants' deceptive business models from the consumer complaints Booking Holdings receives from the consumers who book through Guest Reservations and Book Online -- and from public reporting about lookalike scam websites." Booking Holdings has not conceded these allegations.
The complaint alleges that Booking is violating the law: "Booking Holdings has participated in the violations ... because it has aided and abetted the website defendants. Booking Holdings knows of the website defendants' conduct alleged in this complaint and knows that such conduct is unlawful, fraudulent and unfair. Nevertheless, Booking Holdings has provided and continues to provide substantial assistance to further the website defendants' deceptive practices -- for example, by maintaining the website defendants' ability to access Booking Holdings' real-time hotel inventory and payment processing system."
If the court upholds this "aiding and abetting" standard, it could create a newly recognized legal duty for host agencies to review ICs' websites to make sure that they are not replicating a supplier's booking portal or otherwise selling in a deceptive way, especially in cases where the host is aware of client complaints.
Unless the defendants settle, the California case will take months or even years to be finally adjudicated, but it may become a template other city attorneys and state attorneys general may follow.
In the meantime, you should consider adding a clause to your IC agreement that lets you audit or review any IC's online marketing and allows you to suspend any access to content on short notice if the IC does not cease the deceptive practice.