Orbitz to receive more scrutiny

The online travel agency will soon find itself under the microscope again: Congress has called on the Department of Transportation to report on its compliance with antitrust laws.

3 min read
Online travel agency Orbitz will soon find itself under the microscope again.

As part of the transportation spending bill signed by President Bush on Tuesday, Congress has called on the Department of Transportation (DOT) to report by July on Orbitz's compliance with antitrust laws. The DOT and the Department of Justice have already launched investigations of the Chicago-based company, which was formed by the five major airlines.

Congress "is interested in the impact the joint entry of suppliers of air travel services into the market for direct distribution has had to date on consumers, airline competition and ticket prices," the law reads.

Orbitz spokeswoman Carol Jouzaitis blasted the provision.

"It's outrageous that our competition would call in a political favor with the goal of harassing a competitor," Jouzaitis said. "Our competition pushed through this politically motivated provision that requires the DOT to waste taxpayers' money studying something they've already studied twice."

But Suzi LeVine, a spokeswoman for Orbitz-rival Expedia, said Orbitz's actions warrant further investigation.

"This is the right thing to do," LeVine said. Congress "is identifying an ongoing concern and isn't going to let them off the hook."

Orbitz has been engaged in an continuous battle with rival travel services Expedia and Travelocity.com that predates its launch in June. Expedia and Travelocity have charged that Orbitz's relationship with airlines such as United, Delta and American has given it unfair access to the lowest airfares.

Meanwhile, Orbitz has complained that a "confederacy" of companies has ganged up against it and manipulated the government into pursuing unfair investigations.

The Department of Justice has an ongoing investigation into Orbitz. Meanwhile, after conducting its own investigation, the Department of Transportation declined to block Orbitz from launching, but said it would continue to monitor the company.

As part of the new law, the DOT will have to report to Congress on whether Orbitz's relationship with the major airlines has resulted in any monopolistic or anti-competitive behavior on its part and whether the major airlines have engaged in anti-competitive behavior by not distributing low-cost fares to Orbitz's rivals.

Orbitz issued a report to the DOT last month about the company's effect on competition in the online travel market. Orbitz's Jouzaitis said the report was "extensive and detailed, contrary to what our competitors would lead you to believe."

But LeVine said the report was biased because it was issued by Orbitz itself.

"It was highly subjective and lacked credibility," she said. "It didn't address critical competitive issues."

The concern about Orbitz is not whether the company is offering good deals for consumers but how long it will continue do so, especially if it is allowed to undermine the competition, said Antonella Pianalto, executive director of the Interactive Travel Services Association, a trade group backed by Expedia and Travelocity.

"We believe that if the DOT does a thorough investigation (of) Orbitz's practices they will conclude what members of Congress and what leading consumer groups believe: that (by) having five airlines jointly control a distribution method, ultimately consumers are going to be harmed," Pianalto said.

Despite disagreeing with the need for further scrutiny, Orbitz will cooperate fully with the DOT in preparing its report to Congress, Jouzaitis said.

"We have no reason not to. And we're confident it won't come out any different than the other two," she said.