Lawmakers Seek Tougher Probe of Orbitz

Two dozen members of Congress have called on the U.S. Department of Justice (DOJ) to increase its scrutiny of the business practices of controversial travel company Orbitz, raising questions about whether exclusive airfares are provided to the airline-backed site.

In a letter to the DOJ, 24 congressmen said Orbitz, which competitors have warned would be anticompetitive since its conception two years ago, is no longer “a theoretical threat.”

The letter noted that the online travel sector — which is populated by a host of small, independent sites — is raking in more than US$20 billion per year, making it one of the fastest-growing and most important sectors of e-commerce.

“The major airline owners of Orbitz appear to be using this joint venture to restrict output of critical travel information, to shift the costs of online travel distribution to consumers and to steer traffic away from small carriers,” said the letter, which was sent to Assistant Attorney General Hew Pate.

Dueling Inquiries

An ongoing DOJ investigation, which was opened before Orbitz went live last summer but has yet to yield any results, is being run separately from a U.S. Department of Transportation inquiry. That probe is expected to end next month, with a report on Orbitz’ business practices delivered to Congress sometime this summer.

The congressional letter echoed the main complaints that competitors, represented mainly by the Interactive Travel Services Association (ITSA), have raised about Orbitz and its agreement with airlines.

According to the lawmakers, airlines must agree to give “most favored nation status” to the site, funneling exclusive fares to Orbitz. In addition, they said, an in-kind promotion clause in the agreement results in airlines denying access to their most enticing ticket offerings to other Web sites.

“In effect, the owners of the airlines are discouraged from ever offering to other travel ventures access to fares which will not also be made available on the Orbitz site,” the letter stated.

Competitors Blamed

Orbitz has maintained that antitrust claims are being made exclusively by its competitors. According to the company, it has helped consumers by forcing existing sites to find better deals and improve customer service. Orbitz cited publicly advertised sales on airfares through other sites, such as one-day sales run by Travelocity, as proof that the playing field is level.

In a statement provided to the E-Commerce Times, Orbitz president and CEO Jeff Katz said the company has actually increased competition in the online travel sector and has benefited consumers by prompting other sites to improve their offerings.

“Orbitz has, in nine short months, energized competition in online travel,” Katz said. “We have all benefited through increased consumer acceptance.”

Orbitz blamed the dual probes on its competitors, saying they are trying to “snuff out new competition.”

Exclusive Fares at Issue

The ITSA, however, continues to maintain that government regulators must look anew at Orbitz now that it has nearly a year’s worth of business under its belt. The site, first developed about two years ago, began selling tickets in June 2001 and quickly reported sales and traffic levels that exceeded expectations.

Antonella Pianalto, executive director of the ITSA, told the E-Commerce Times that checks of the Orbitz site have shown that up to 60 percent of fares are exclusive to the company.

“That’s not a competitive practice,” she said.

Although it quickly became a major player in the online travel world, Orbitz has yet to overtake the top two players, Expedia and Travelocity, in terms of overall traffic.

Orbitz also has not dented Expedia’s ability to turn a profit. The company reported better-than-expected earnings this week and raised its outlook for the rest of the year, sending its stock price soaring to an all-time high.

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