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Lawmakers urge stronger Orbitz probe

Two influential congressmen jointly submit a letter expressing concern about potential antitrust violations and portray the online travel site as harmful to competitors.

Influential congressmen expressed concern Wednesday about potential antitrust violations of Orbitz, the controversial online travel site operated by the nation's largest airlines.

Bob Goodlatte, R-Va., and Rick Boucher, D-Va., jointly submitted a letter to R. Hewitt Pate, deputy assistant attorney general to the U.S. Department of Justice.

The letter, which Orbitz blasted as "simply a repeat of misinformation," was similar to those sent in recent weeks by other politicians. But the newest missive went to greater lengths to portray Orbitz as harmful to competitors in the $31 billion online travel niche. Although Goodlatte and Boucher wrote the letter, it carried the signatures of 22 other Congress members from both parties, including eight who serve on the Judiciary Committee.

"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 smaller carriers," Goodlatte and Boucher wrote. "We are concerned that these developments are evidence of consumer harm that will inevitably worsen without appropriate action."

Orbitz executives sharply rebuked the letter--the latest salvo in a war between Orbitz and larger rivals Expedia and Travelocity. Orbitz Chief Executive Jeff Katz characterized the letter as "the same old distortions and misinformation that have been previously rejected by government regulators."

"This letter is the result of large, entrenched players' efforts to stop new competition that is driving down distribution costs for travel suppliers while improving the online travel experience for consumers," Katz said in a statement Wednesday. "These giant competitors, while clinging to a business model that raises costs for the travel industry and ultimately to consumers as well, are reporting record growth and profits despite Orbitz's launch."

The letters come as the inspector general of the Transportation Department is reviewing Orbitz's business practices--the second time the company has come under government scrutiny since its founding in 2000. The U.S. Department of Transportation, Inspector General Ken Meade and the Senate Commerce Committee determined last year that Orbitz did not violate antitrust regulations at the time, allowing the company to proceed with business plans.

The inspector opened a second review April 1, and he has 90 days to issue his own findings on whether Orbitz is exploiting any unfair advantages.

A growing number of politicians, as well as executives from Orbitz rivals Expedia and Travelocity.com, are criticizing the Chicago-based company, which has emerged as the fastest-growing travel site on the Internet. A trade group representing Expedia, Travelocity and other agencies hailed the newest letter from politicians, arguing that Orbitz's phenomenal growth could only be explained by anti-competitive advantages.

"The evidence is clear: Orbitz is harming competition," Antonella Pianalto, Executive director of the Interactive Travel Services Association (ITSA), said in a statement issued Wednesday afternoon. "We strongly believe that the evidence will show that Orbitz has acted in an anti-competitive manner."

Orbitz, which has a lock on some of the cheapest fares sold online, began selling tickets in June, and by February it topped $1 billion in revenue. By contrast, it took Seattle-based Expedia, which debuted in October 1996, about four years to reach $1 billion in annual revenue. It took Fort Worth, Texas-based Travelocity, which debuted in March 1996, about three years.

Politicians and rivals are most concerned about Orbitz's "most-favored nation" status, a designation that guarantees that the company gets the airlines' lowest prices on many fares. Opponents want the government to make Orbitz remove the clause.

Orbitz executives have steadfastly rejected that request, though they have never downplayed their aggressive business strategy. United Airlines, American Airlines, Delta Air Lines, Northwest Airlines and Continental Airlines invested $145 million to found Orbitz in 2000--at the time a venture known as "T2" and rumored to stand for "Travelocity Terminator."

The newest letter of concern over Orbitz comes from congressmen who have significant influence over Washington's policies on Internet issues.

Goodlatte serves as vice chairman of the Courts, the Internet and Intellectual Property Judiciary Subcommittee. He's also co-chairman of the Congressional Internet Caucus and a frequent speaker at regional technology forums.

Boucher is the only democratic member of the House of Representatives to serve on both the Commerce and Judiciary Committees, the two committees most involved in crafting Internet and information technology policy. In 1996, he co-founded the Congressional Internet Caucus, a bipartisan group of more than 140 members of the House and Senate.

But Orbitz defenders have also been busy drafting letters to federal regulators.

Michael Conway, chairman, president and CEO of Las Vegas-based National Airlines, sent a letter to Transportation Secretary Norman Mineta last week hailing Orbitz for providing consumers with "a comprehensive, unbiased listing of all their flight options." Conway wrote that Orbitz helped reduce distribution costs for participating airlines by selling tickets directly to consumers and charging the airlines fewer fees.

"In short, Orbitz is creating a downward pressure on booking fees that has never existed before, pressure that is resulting in savings for big and small airlines alike and that will be, to a certain extent, passed on to air travelers," Conway wrote. "I view this as a significant breakthrough."