Orbitz Under Fire Again.

21st Nov 2001

The Interactive Travel Service Association (ITSA) issued a statement yesterday calling on the U.S. Department of Transportation to investigate Orbitz.

ITSA`s statement was in response to a report that Orbitz Chief Executive Jeffrey Katz filed with the Department of Transportation last week. In April, the Department of Transportation asked Orbitz to submit a report after six months regarding how it was affecting Web travel. The department`s request came at the conclusion of an informal investigation into whether Orbitz violated antitrust laws.

At the heart of the objections raised by Orbitz`s competitors is the Most Favored Nations clause written into the contracts that Orbitz has with about 30 airlines. This gives the company a lock on receiving the lowest published fares that any of its charter airlines has to offer. An airline can offer low fares to a competitor, but under the MFN clause, Orbitz must be offered them as well.

According to a report by Greg Sandoval, ZDNet, by crying foul, ITSA is just trying to avoid competition, said Orbitz spokeswoman Carol Jouzaitis. Orbitz`s technology has attracted swarms of customers, and that has propelled the company`s swift rise to become the third-largest Web travel agency, she said. Moreover, Jouzaitis insists that Orbitz has never initiated the MFN clause.

ITSA Executive Director Antonella Pianalto disputed this claim in the written statement. Katz`s report “ignores the harmful effects of the Orbitz contract`s Most Favored Nations clause,” she said. “Despite its claims about having superior technology, the only `special sauce` Orbitz has is this cartel clause—it is the reason why Orbitz has achieved its unprecedented size in five short months,” Pianalto said. ITSA members include Expedia, Galileo International, HRN, Sabre and Travelocity.


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