Priceline Faces Possible FTC Action Over Affiliate's Hotel Ads, Reuters Reports; Booking Shares Slip

The Federal Trade Commission is preparing to take action against Priceline, the online travel brand owned by BKNG, over deceptive hotel advertising, two sources familiar with the matter told Reuters. The case centers on Priceline affiliate Guest Reservations, whose ads appear to direct consumers to a hotel's own site but send them to a third-party site where they are often charged extra. The FTC is weighing whether those sites violate its rule against impersonating businesses, alongside fee-related violations. One source said the case could carry more than $500 million in potential penalties.

The matter is not new to investors. Booking disclosed in August that the FTC was considering suing Priceline and an affiliate over disclosures, fees, customer support and billing practices, and said it was in talks with the agency to resolve it. Guest Reservations has drawn more than 1,000 consumer complaints to the Better Business Bureau, many from people who believed they were booking directly with hotels. An FTC spokesperson confirmed the investigation, while Priceline declined to comment. No complaint has been filed, and the $500 million figure is a single source's estimate of potential penalties, not an assessed fine.

Booking shares were down about 1.1% at $155.87 late Wednesday, extending a slide that has left the stock down 26% year to date. TipRanks noted a consensus price target of $233.29 with 22 Buy and 7 Hold ratings, and that Booking grew second-quarter revenue 8% while guiding to 4% to 6% growth for the third quarter.

What to watch: whether the FTC files a complaint or announces a settlement, the final penalty size relative to Booking's scale, and any changes to affiliate marketing practices that could affect hotel booking volumes. Booking's third-quarter report will be the next chance for management to update investors on the talks.