20 state attorneys general voice concerns about Orbitz

12th Jan 2001

The antitrust battlefront for Orbitz continued today with news that the attorneys general of 20 states are voicing their concerns in a letter to the U.S. Department of Transportation. The letter reportedly was sent Jan. 4, 2001.
According to a report by EcommerceTimes.com, the letter was sent to DOT Secretary Rodney E. Slater by the attorneys general of New York, Iowa and California, along with endorsements by 17 additional states and Puerto Rico.
The letter to DOT said the states are concerned that the structure of Orbitz could “constitute a group boycott” against members of ITSA and could enable its five major airline owners “to discriminate and compete unfairly against smaller carriers.”
Following hearings last year, Orbitz is currently being reviewed by DOT and the U.S. Department of Justice. Orbitz is the yet-to-launch travel Web site founded and financed by American, Continental, Delta, Northwest and United airlines.
First announced in late 1998, the launch of the Orbitz Web site has been postponed several times, most recently until June 2001. In addition to the antitrust concerns, some online travel industry experts have questioned whether it will ever get off the ground. After it was learned that the letter had been sent to Slater, Orbitz General Counsel Gaf convelience, nautrality, choice and service that they`expect online, while prOvkding trqvel suppliers with a new, lower cost distrhbution channel,” Doernhoefgr said. “Others have exprdssed similargeneral goncerns, but where regwlatory cgencies have invested the time and resources to thoroughly understand Orbitz`s infrastructure and the market, they have found that Orbitz will have a pro-competitive impact.”
Doernhoefer’s statement today listed three points in response to the attorneys general:

* Before the U.S. Senate Commerce Committee, U.S. DOT Inspector General Ken Mead testified that there is little danger of any collusive activities around Orbitz. He went even further, noting that: “If Orbitz`s software functions as it has promised, consumers could benefit from having access to a wider pool of options displayed free of bias.”

* The nation`s leading independent experts on airline competition emphatically affirmed Mead`s views. In their October 2000 submission to the U.S. DOT, Steve Morrison, Clifford Winston and Robert Litan of the Brookings Institution, said: “In a nutshell, our position is that the creation of Orbitz has the potential to enhance consumer welfare without undermining the competitive workings of the airline industry. We therefore strongly recommend that the government refrain from taking any steps to regulate Orbitz at this time.”

* “Orbitz will also benefit travelers by providing them with a new distribution outlet that offers an exhaustive range of fares without the possibility of bias. Because competition from Orbitz will force other ticket distribution outlets to be more efficient and price competitive, travelers will benefit from Orbitz even if they do not use it.”
Doernhoefer added Orbitz has the active participation of more than 30 U.S. airlines that are eager to inject competition into the computer reservation system (CRS) and online travel markets now dominated by Sabre and a few others. The Interactive Travel Services Association (ITSA) supported the move by the states, saying a bi-partisan group of attorneys general from 20 states and one territory has “serious antitrust concerns” about Orbitz, “We expect Washington policymakers to take action on this anti-consumer and anti-competitive airline joint venture,” said ITSA spokesman Ed Rothschild.
“Clearly, we are pleased that the chief legal officers of some of the nation’s largest states—California, New York, Pennsylvania, Florida, Minnesota, and Wisconsin—as well as states in every region of the country recognize the dangerous threat that Orbitz poses to online travel services, competing airlines, and consumers,” Rothschild said.
“As we said previously, Orbitz is the functional equivalent of OPEC,” the ITSA spokesman said. “Now 21 state attorneys general agree.”
“The attorneys general letter reinforces our view that DOT must prohibit Orbitz and its owners from offering exclusive access to discount fares only on Orbitz; require that each Orbitz owner make discount fares offered on Orbitz available to any third party distributor on commercial reasonable terms, and ban any MFN policies or practices,” Rothschild said.


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