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Online Travel -- Might Congress Step In?

The possibility of Congressional action in the online travel sector was raised today at a House subcommittee hearing in Washington called to examine supplier-owned online travel sites such as Orbitz.

Representatives of the site owned by a consortium of airlines did not attend, citing lack of notice and a scheduling conflict, but Orbitz said in written testimony for the hearing that "the purpose of Orbitz is to bring new competition to automated distribution: new price competition, new technology, competition in the quality and content of the information provided, and new customer service competition."

But some of the panel members of the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protections weren't buying that, and neither was Travelocity.com's CEO, Sam Gilliland, who told the panel that Orbitz "precludes selective price discounting by airlines, including in deals with independent travel sites."

"The concern is that we typically don't get guarantees as to the quantity of fares made available to us. We get dribs and drabs, crumbs, not a slice of the cake," he said, adding that it "makes it difficult to compete."

Paul Ruden, senior vice president for legal and industry affairs at the American Society of Travel Agents, said that if a pending Justice Department investigation of Orbitz does not rectify the situation, "Congress may need to step in to address this aggregation of market power."

"Independent distributors are at risk of being displaced," he said.

Ruden said that in ASTA's view, "the e-commerce marketplace for travel services is being distorted and misused by airlines who seek collectively to dominate the Internet space, and indeed all distribution channels, while throwing roadblocks in the way of competitors."

"The government is going to have to take some swift and strong action to stop the trend toward airline domination of this space," he said.

Gilliland said that Orbitz has in its airline agreements what has come to be called "Most Favored Nation" status, meaning that contractually, every fare on an airline's Web site must be given to Orbitz . "Simply removing the MFN language would go a long way" toward leveling the playing field, he said.

Orbitz, in a statement prepared by Gary R. Doernhoefer, its vice president and general counsel, said that since the airline site launched 13 months ago, "price competition has increased (with several of our larger competitors for the first time engaging in price reductions on the cost of making a booking."

He also said that customer service at many Web sites, both online agencies and individual airline sites, has improved considerably in competitive response to improvements in customer service first launched by Orbitz.

Last month the U.S. Department of Transportation issued an inconclusive report on Orbitz, the third most visited travel site. The agency cited no anti-competitive fallout from Orbitz so far, but it said the ticket venture could potentially have a negative effect on airline competition.

Orbitz, which has an IPO pending, is owned by American Airlines, United Airlines, Continental, Delta and Northwest Airlines.