DOT revisits Orbitz investigation
- 22 March, 2002 08:25
Almost a year after the government gave it the green light to launch, Orbitz LLC is again under federal scrutiny following pressure from competitors that say the online site has unfair direct access to airline bargains.
Last week, the U.S. Department of Transportation (DOT) sent a letter to Orbitz requesting information on its business plans and contracts. In a letter dated March 12, Read C. Van de Water, assistant secretary for aviation and international affairs, said he was investigating to determine if Orbitz's business agreements "are unreasonably restricting competition in the airline and airline distribution businesses," Orbitz spokeswoman Stacy Spencer confirmed.
"This was the first real communication that we had requesting information [since last April]," Spencer said.
"Orbitz welcomes the DOT's comprehensive study of the online travel marketplace. The DOT review is nothing new. In fact, in previous regulatory reviews, Orbitz was cleared of any competitive issues. We welcome continued competition in the online agency marketplace and are confident that this study will reaffirm our pro-competition, pro-consumer position, " Spencer said in a statement.
Last April, the DOT cleared the airline-backed Web site for its launch in June, concluding that there was insufficient evidence to prove the company was engaged in anticompetitive practices. However, the DOT also said it would review Orbitz's performance.
"With Orbitz now in business for nine months, we believe the DOT will find ample evidence to support enforcement proceedings," said Antonella Pianalto, executive director of the Interactive Travel Services Association.
"The information requested by the DOT focuses on Orbitz's exclusive access to Web-only fares as a result of provisions in Orbitz's Airline Charter Associate Agreement, including the so-called most-favored-nation clause, or 'cartel' clause, and the exclusivity incentives," Pianalto said in a statement.
The association is a lobbying group that was founded by Orbitz competitors, including Travelocity.com and Expedia.com, when Orbitz "was still a speck in Delta's eyes, a glimmer," said Lorraine Sileo, an analyst at PhoCusWright Inc. in Sherman, Conn.
There is no doubt Orbitz has access to fares that other online travel sites don't, she said. "That's a fact," she said. However, proving this will harm consumers will be difficult, Sileo said.
"There is categorically no consumer harm being done right now," said Henry Harteveldt, an analyst at Forrester Research Inc. in Cambridge, Mass.
Orbitz was founded by United Air Lines Inc., American Airlines Inc., Delta Air Lines Inc., Northwest Airlines Inc. and Continental Airlines Inc. and now has the support and backing of most airlines. The exception is Southwest Airlines, which refuses to pay fees to have its fares listed and has gone so far as to remove its fare pricing information from APTco, the airline consortium that publishes air fares to travel agents and other airlines.
Orbitz and its competitors don't limit themselves to airline tickets, however.
"Our argument is, the DOT needs to evaluate everything that is going on in this marketplace," said Spencer. She noted that Expedia has exclusive agreements with hotel chains to provide deals only through its site and that those deals aren't available to Orbitz.