Government moves forward with its investigation of online travel company Orbitz

Posted 7:50AM on Wednesday 20th March 2002 ( 23 years ago )

NEW YORK - The government is moving forward with its investigation of online travel company Orbitz LLC, which has been under scrutiny for potentially anticompetitive behavior since its inception nine months ago. The Department of Transportation last week asked Chicago-based Orbitz to provide confidential documents pertaining to its business plans and contracts. The agency's request, made in a letter dated March 12, also extended to the five airlines that own Orbitz, its business partners and several competitors. "We seek to determine whether the terms of participation in Orbitz are unreasonably restricting competition in the airline and airline distribution businesses," said the letter, which was signed by the agency's assistant secretary for Aviation and International Affairs, Read C. Van de Water. A copy of the letter was obtained by The Associated Press late Tuesday. Orbitz, which was launched last June with $145 million in seed money from five major airlines, has been accused by its competitors of trying to reduce, if not eliminate, competition and pave the way for higher airfares. Competitors such as Travelocity.com Inc. and Expedia Inc. have asserted that Orbitz' owners -- American, Continental, Delta, Northwest and United -- withhold from them certain "Web fares," the heavily discounted tickets promoted on their own Internet sites. Orbitz has access to all of its owners Web fares, while Travelocity and Expedia have access to just some. A lawyer for Orbitz, Gary Doernhaefer, said Orbitz welcomed the investigation and that its competitors accusations are "patently false." Doernhaefer said if the government were to mandate that all Web fares be sold through all channels, the result would be higher distribution costs and higher airfares. Orbitz's argument is that it has struck more deals with airlines for Web fares because it offers a cheaper distribution channel than its competitors. Orbitz says it saves airlines about 30 percent on each transaction compared to other travel agents or Web sites. One of Orbitz biggest critics, Travelocity.com, said its rival benefits from unfair business practices. "They have long-term exclusive deals with those five airline owners," said Michael Berman, a spokesman for Dallas-based Sabre Inc., which is the majority owner of Travelocity. "In nine months, they've gone from nowhere to becoming the third largest online travel agency. Clearly they've had an advantage." An earlier investigation into Orbitz, which was completed by the Transportation Department before the company's launch, found no evidence of monopolistic intentions. The new review will compare the operations of Orbitz and its competitors and look into the nature of the contracts between the airlines and the Web sites. For example, the department requested a month-by-month sales breakdown of airline tickets, the percentage derived from Web-based fares and which airlines offered them. It also asked: "What deals have airlines offered you, or have you offered airlines, in order to obtain access to Web fares?" Roughly $14 billion was spent online in 2001 for airline tickets, according to Forrester Research of Cambridge, Mass. That is still less than 10 percent of all airline ticket sales. Besides airline tickets, Orbitz and its competitors also offer vacation packages, hotel rooms and rental cars. ------ On the Net: http://www.orbitz.com

http://accesswdun.com/article/2002/3/197156