State attorneys general voice antitrust concerns about airline ticketing venture

A group of 21 state attorneys general yesterday sent a letter to the U.S. Department of Transportation (DOT) expressing concern that the controversial airline-owned Orbitz online ticketing venture will inflate travel prices and eliminate competition.

Chicago-based Orbitz rebuffed the claims, insisting in a statement posted on its Web site that the questions raised by the attorneys general have already been asked and answered at the federal level. The ticketing venture, which is due to open for business this spring, also said the criticisms were "clearly premature" because the state officials are only in the early stages of reviewing Orbitz on antitrust grounds.

In their letter, the attorneys general acknowledged that the review is still being conducted. But they asserted that the potential benefits Orbitz could produce for travelers "seem too slight ... to compensate for what may be the scheme's inherent dampening of competition among its participants and from alternate channels of distribution."

The chief concern of the states stems from the fact that the five biggest U.S. airlines have all joined together as investors in the e-commerce venture. "The airlines, acting collectively, have an incentive not to share information fully with competing Internet and non-Internet travel agencies," said the letter to the federal agency.

However, a review by the DOT's inspector general and an independent study conducted by the Brookings Institution last year both concluded that Orbitz isn't structured in a way that would encourage or induce collusion between the airlines. DOT Inspector General Kenneth Mead did promise, though, that any collusion would likely "result in swift and meaningful action" by the federal government (see story)

Orbitz spokeswoman Carol Jouzaitis said potential competitors have been racing to improve their online ticketing Web sites and airfare search engines before Orbitz's scheduled June debut. "We haven't launched yet, and we're having a positive impact on this industry," she said.

Cornish "Con" Hitchcock, a veteran aviation industry watchdog who now chairs Orbitz's consumer advisory panel, also defended the company. "If this were an effort by the big airlines to get together and mop up the field, I wouldn't be with them," Hitchcock said.

Orbitz should be able to use the search engine technology it's developing to lower the fees that are currently charged on ticketing transactions, Hitchcock said. That, he added, is causing established travel-industry companies to pour on the political pressure against the airline-backed upstart.

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

Krista Pappas, an analyst at Gomez Advisors Inc. in Waltham, Mass., said no such anticompetitive red flags were raised when major hotel chains formed an online venture called TravelWeb. "I do think there's a campaign out there to make sure that [the launch of Orbitz] does not take place," she said.

But while Pappas said she doesn't see much merit in the claims that were made against Orbitz in yesterday's letter, she did say that it raises a potential threat for the new venture if the attorneys general decide to take court to try to block its launch. "Twenty lawsuits slapped on top of what they're [already] going through will obviously put a chink in their armor," she said.

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