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.”
