Orbitz cleared of antitrust concerns

The airline-backed travel site has not violated antitrust laws, the U.S. Department of Justice concluded, ending a two-year investigation.

Stefanie Olsen Staff writer, CNET News
Stefanie Olsen covers technology and science.
Stefanie Olsen
2 min read
Orbitz has not violated antitrust laws through its airline-backed travel site, the Department of Justice concluded Thursday, ending a two-year investigation.

"The division considered several theories of harm...(including) whether certain Orbitz contract terms would facilitate coordination among the participating airlines or reduce their incentives to discount resulting in higher fares," R. Hewitt Pate, assistant attorney general for the U.S. Department of Justice's Antitrust Division, said in a statement.

"The division found that those terms did not result in higher fares or make Orbitz dominant in online air travel distribution," Pate said.

Orbitz CEO Jeff Katz said the Justice Department's decision was consistent with those of other government and independent agencies. In 2001, the U.S. Department of Transportation, Inspector General Ken Meade and the Senate Commerce Committee determined that the discount travel e-tailer did not violate antitrust regulations at the time, allowing the company to proceed with business plans.

"This is a great victory for Orbitz. We have always maintained that Orbitz has invigorated competition in the online travel industry to the benefit of consumers and travel suppliers," he said in a statement.

The Justice Department's decision closes a chapter on a long history of turmoil for Chicago-based Orbitz. Animosity toward Orbitz began in 2000, when United, American, Delta, Northwest Airlines and Continental Airlines invested $145 million in a venture known as "T2." Rumored to stand for "Travelocity Terminator," T2 was a project designed to unseat the Fort Worth, Texas-based agency that at the time was the largest online travel company.

Expedia and Travelocity have long charged that Orbitz's relationship with airlines has given it unfair access to the lowest air fares. Nearly eight months after Orbitz began selling tickets, it had 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 Travelocity, which debuted in March 1996, about three years.

The quick success alarmed rivals, who attribute much of Orbitz's gains to its "most-favored nation" status, a designation that guarantees that the company gets the airlines' lowest prices on many fares. The Justice Department investigated the effects of that status and found that it did not result in higher fares.