The Office of Fair Trading says it has a "provisional view" that a leading hotel group and two of the biggest online booking sites have been limiting price competition for rooms and keeping discounters out of the market.
It alleges that InterContinental Hotels Group (IHG), Expedia and booking.com have infringed competition law while offering hotel rooms online.
The allegations are highly embarrassing at a time when British hotels are on show to the world during the Olympics.
The OFT's findings apply to rooms booked by UK customers -- a business worth £10bn a year -- though concerns have been raised worldwide about hotels' sales tactics.
The investigation began in September, 2010, after a website advertising discounted hotel rooms complained that it was being put under pressure to maintain a standard price rather than share its commission with customers.
The effect was likely to be that travellers would be shown the same price on a wide variety of websites, all of them able to claim that they had the lowest price on offer.
Officials call such practices "vertical price fixing". Hotels are free to charge what they like if they sell directly to customers: the question is over attempts to set the price while selling through online agents.
The OFT says it wants people to be able to shop around for discounted rooms. It limited its probe to a few major companies to save time but comments that the alleged practices are "potentially widespread in the industry".
IHG said its arrangements with online booking agents were "compliant with competition laws and consistent with the long-standing approach of the global hotel industry".
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