Transportation official sees no collusion in Orbitz plans

ORLANDO -- In a letter to the chairman of the Senate Commerce Committee, the inspector general of the U.S. Department of Transportation (DOT) said he sees nothing in the business plans of the proposed Orbitz online ticketing Web site that would encourage anticompetitive collusion on the part of its airline owners. But he also made it clear that any such collusion would likely "result in swift and meaningful action" by the federal government.

Earlier this year, the DOT and the U.S. Department of Justice launched separate antitrust-related investigations of Orbitz after travel agent groups and other online travel companies claimed that the Chicago-based start-up would stifle competition in the ticketing business because of its airline ownership (see story). The Senate Commerce Committee also opened an inquiry into the matter and held a hearing on Orbitz in July (see story).

DOT Inspector General Kenneth Mead was one of the people who testified before the committee, which is chaired by Sen. John McCain (R-Ariz.). In a follow-up letter that was sent to McCain earlier this month and made public at the eTravelWorld conference here yesterday, Mead didn't discount the potential for malfeasance if the airlines that are funding Orbitz decided to collude with one another on issues such as the pricing of fares.

But Mead wrote that Orbitz -- which is being funded by the five largest U.S. airlines -- doesn't appear to be encouraging or inducing such collusion as part of its business plans. He also said a requirement that participating airlines make all of their fares available through the company's Web site doesn't qualify as anticompetitive behavior.

"The airlines will have no greater access to each others' fares than they currently have through browsing their competitors' Web sites and purchasing data [gathered by computerized reservations systems]," Mead wrote. "Although Orbitz will gather this information more easily in one place, it will not offer a substantially greater platform upon which the airlines can communicate [with one another] about pricing."

At the same time, Mead said Orbitz will have to live up to its promises to act as "a bias-free [travel] agency." Offering selective information to online users looking to book tickets through its Web site "could be considered a deceptive practice," he wrote. The DOT "has oversight for such activities, and our expectation is that such a practice would result in swift and meaningful action," Mead added.

In a report issued at the eTravelWorld conference today, New York-based Bear, Stearns & Co. predicted that Orbitz will survive the federal scrutiny and be cleared to rise or fall in the marketplace on its own business merits.

The claims that the company will hurt competition after its scheduled launch next June "are mostly hyperbolic, and we believe Orbitz is more likely to be customer-friendly rather than a monopolistic monster," said Bear, Stearns analyst Robert LaFleur as part of the report. The only action that the government might take would be to require participating airlines to make their online-only fares available on other Web sites in addition to Orbitz's, he added.

Orbitz CEO Jeffrey Katz, who spoke at the conference yesterday about the development challenges still facing the company (see story), said he fully expects to get a green light from the government. Katz accused Orbitz's potential rivals of "mudslinging" and "distortion" aimed at delaying the company from getting into the market.

Earlier this month, Orbitz postponed the scheduled launch of its site from this fall to next spring (see story). But that wasn't blamed on the government's investigations -- instead, Katz said more time was needed to develop an advanced search engine and then run a beta-test of the Orbitz site with at least 100,000 users.

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