DOJ Investigates Airlines' Planned Net Venture

SAN FRANCISCO (05/21/2000) - Federal antitrust investigators are stepping up scrutiny of new online marketplaces that are all the rage among firms trying to cut costs or streamline their operations. The U.S. Department of Justice announced Friday that it is investigating whether a planned online service run by five major airlines would violate antitrust law.

That investigation comes on the heels of a similar probe by the Federal Trade Commission, which has begun looking for evidence of collusion on behalf of an online marketplace for car parts to be established by the Big Three automakers:

General Motors Corp., Ford Motor Co. and DaimlerChrysler AG.

More and more, industries are rolling out plans for Internet exchanges in the hope that virtual marketplaces will consolidate their buying and selling efforts. But the establishment of those exchanges raises delicate questions about marketplace fairness, and the process is certain to be watched closely by federal antitrust investigators. The probe of the airlines' plans began a few weeks ago. Justice Department investigators are focusing on the proposed business practices of a Web site tentatively called T2 that will sell tickets to consumers and is backed by Continental, United, Delta, Northwest and American Airlines.

T2 is the airline industry's effort to combat upstarts like Travelocity.com, Expedia.com and Priceline.com, all of which sell airline tickets on the Web.

The airlines defended their plans for T2. "We are confident that our site meets all antitrust requirements and that it will benefit Web consumers by offering them better travel information and more choice," says Alex Zoghlin, CTO of the airline-backed travel site. "We pledge full cooperation with the Justice Department's review."

The probe was prompted by complaints from travel agents, who asked for an investigation in February. "The development of these single-source, airline-controlled Web sites is making a mockery of the competition goals of the Airline Deregulation Act," says Joe Galloway, president and CEO of the American Society of Travel Agents. "If these anticompetitive collaborations are allowed to proceed, it will be a heavy price indeed." A Justice Department spokeswoman declined to elaborate on how long the probe might last.

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