RealTime IT News

Justice Clears Orbitz in Anti-Trust Probe

Orbitz, Inc., the subject of a Justice Department inquiry, was cleared late Thursday of any wrongdoing in an alleged scheme to limit competition by controlling airline ticket prices.

Chicago-based Orbitz is the online travel consortium created by American Airlines , United Airlines , Delta Airlines Inc. , Northwest Airlines and Continental Airlines . The venture was capitalized to the tune of $204.8 million when it was founded back in February of 2000.

The Justice Department probe centered on whether Orbitz was in a position to collude in the control of airline ticket prices and to restrict the distribution of online air travel data. U.S. assistant attorney general R. Hewitt Pate said Orbitz was cleared in the anti-trust probe, and the investigation is now formally closed.

Pate said "the Antitrust Division concluded that the Orbitz joint venture has not reduced competition or harmed airline consumers."

Another division of the Bush Administration, the Inspector General of the U.S. Department of Transportation issued it own study in 2002. The DOT's review determined Orbitz didn't have an unfair market advantage in airline travel sector.

One aspect of the Justice Department's probe was a MFN, or most favored nation clause, which bars the airlines in the venture to offer their lowest fares to any other travel site, in addition, to its own customers.

Pate said in a statement on Thursday that "the division found that those terms did not result in higher fares or make Orbitz dominant in online air travel distribution."

Orbitz, in a press release issued late Thursday, quoted its President and CEO Jeff Katz as saying "today's DOJ announcement is the clearest and most important statement that Orbitz has increased and energized competition in the online travel marketplace. It is a fact that consumers already know, and that federal and state agencies have previously validated eight different times. This is a great victory for Orbitz. We are grateful for the DOJ decision. We have always maintained that Orbitz has invigorated competition in the online travel industry to the benefit of consumers and travel suppliers."

Katz went onto say that "Orbitz has energized competition and improved the Internet shopping experience for consumers who have easier access to low fares. Our company continues to honor the original charter to provide consumers with a more powerful and easier-to-use search engine that presents comprehensive and unbiased travel information, while providing travel suppliers with lower-cost distribution alternatives."

The legal investigations of Orbitz were initiated by its online travel competitors, including Travelocity and Expedia . While neither Orbitz, nor Travelocity are publically traded, Expedia stock has nearly quadrupled in the past year, rising from $20 in 2002 to nearly $80 on August 1, 2003.

In 2002, Orbitz said it planned to sell $125 million of common stock as part of its plans to go public, but its IPO has yet to materialize and there are no clear plans for its stock offering in the near future.

Just ahead of the Justice Department's decision, Orbitz on July 28, issued a separate press release detailing what it calls its "sleek new site design making it easier to find and book the best travel deals."

Orbitz said it "is now the first online agency on the initial search results page to list aircraft equipment types, time between flights, and identity of partner airlines on code-share flights, while adding more prominent advisories regarding connecting information and overnight flights."