Consumer groups urge government to block Orbitz

Fifteen consumer groups, led by the American Antitrust Institute (AAI), have sent a letter to Transportation Secretary Norman Y. Mineta urging him to block Orbitz, the joint venture of the country's top airlines, from offering their lowest fares only through the Orbitz Web site.

This is the nonprofit AAI's second letter to the secretary and follows a similar letter from 20 state attorneys general as well as the attorney general of Puerto Rico in January. The letters raise concerns that Orbitz would increase prices and stifle competition (see story).

Orbitz is under investigation by the U.S. Departments of Transportation and Justice for possible antitrust violations.

"Air transportation is at a fundamental decision point, and Orbitz is an important part of that decision," the letter states. "We could very well end up with three major airlines and no independent travel agent industry helping consumers navigate to the best terms and conditions of travel. This would be very different from anything we have ever known, and it bodes poorly for consumers."

Impending airline mergers heighten antitrust concerns, since the airline companies involved with Orbitz account for four of every five airline tickets sold in the U.S, said AAI President Albert A. Foer, who signed the letter.

The letter also argues that finding the best prices on air travel depends on "navigators," and that independent navigators such as Expedia Inc., LP and independent nonelectronic agents may be endangered if Orbitz is exclusively permitted to offer the lowest fares directly from the airlines. Unless those advantages are eliminated, the letter said, the role of independent navigators will be reduced and they may be driven from the market, leaving consumers the option of buying their tickets directly from the airlines or from their travel agencies, which would be aligned with its owners' interests rather than consumers'.

In a statement, Orbitz general counsel Gary Doernhoefer said his company's competitors are funding a campaign to block the site.

"Unfortunately, the American Antitrust Institute and others seem to have become victims of this campaign," he said.

"The AAI seems to confuse the issue of proposed airline mergers, which could result in fewer competitors, with the electronic travel distribution channel, where there has been a lack of price competition for years. In doing so, the AAI fails to recognize the consumer and marketplace benefits of adding a new Internet entrant designed to provide the first new competition to Computer Reservation Systems since the 1970s," he said.

Orbitz spokeswoman Stacey Spencer said the airlines are building this joint Internet venture to eliminate the unfair advantages that some airlines have over others through channels such as Expedia and Travelocity. The two major online ticketing sites inflate some ticket placements over others in search results through marketing agreements, and not based on the lowest price, Spencer said.

"We are contractually nonbiased. We are legally bound to only put the fares up based on price," she said.

The letter was prepared by the Consumer Federation of America, the National Consumers League, The Consumer Alliance, the Aviation Consumer Action Project and the AAI, the statement said.

The following groups signed the letter: Alliance for Small Business Advocacy, Columbia Consumer Education Council, the Center for Consumer Affairs at the University of Wisconsin in Milwaukee, the Arizona Consumer Council, the Detroit Department of Consumer Affairs, the North Carolina Consumers Council, the Consumers Alliance of the South East, the Democratic Processes Center, the Wisconsin Consumers League, Consumers for Affordable and Reliable Services, Manufacturers' Agents National Association, Latin American consumer interest group and the Michigan Consumer Federation.

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