Australia's consumer watchdog has put online travel businesses Expedia and Wotif on notice, warning their $700 million tie-up could hurt competition.
The planned takeover of Wotif will leave the local online travel booking sector with only two major players, Expedia and fellow US giant Priceline, which owns Booking.com and Agoda, The Australian Competition and Consumer Commission said.
That could see hotels slugged more for listing their rooms online, as is the case in other markets where Expedia and Priceline have a duopoly, ACCC chairman Rod Sims said.
"Commission rates charged by Expedia and Booking.com in Australia are lower than the rates charged by those companies in other parts of the world," he said.
"The presence of Wotif may be a contributing factor to this difference."
Other players in the travel market have expressed concern Wotif's removal as an independent competitor will allow Expedia to increase its commission rate, Mr Sims said.
The ACCC has called for submissions from industry players, and Wotif says it will work to address the watchdog's concerns.
IG market strategist Evan Lucas said it wasn't surprising the ACCC had identified issues with the takeover.
"Once you take out a Wotif, consumers really lose in terms of reduced competition," he said.
But the deal was still likely to go ahead in one form or another he said.
"When they (the ACCC) raise objections, most companies find a way to appease them, that's why you don't see many of these dealings being blocked by the ACCC," Mr Lucas said.
Wotif shares were down 16 cents, or 4.9 per cent, at $3.10 at 1505 AEST.
The ACCC said it did not believe the presence of bricks and mortar travel agents would be sufficient to constrain the online players, and high advertising costs were a barrier to others entering the internet booking market.
A key factor in the ACCC's final decision on takeover would be the potential for new business models to emerge within the industry and keep the market competitive.
A final decision is expected by October 2.
Wotif's board has recommended shareholders accept Expedia's $3.30-a-share takeover offer, with co-founders Graeme Wood and Andrew Bice agreeing to sell their holdings.
Share
