Orbitz Examined for Anti-Competitive Practices

The government is moving forward with its investigation of online travel company Orbitz, which has been under scrutiny for potentially anti-competitive behavior since its inception nine months ago.

The Transportation Department last week asked Chicago-based Orbitz to provide confidential documents pertaining to its business plans and contracts. The agency’s request in a letter dated March 12 also extended to the five airlines that own Orbitz, its business partners and several competitors.

“We seek to determine whether the terms of participation in Orbitz are unreasonably restricting competition in the airline and airline distribution businesses,” said the letter, which was signed by the agency’s assistant secretary for Aviation and International Affairs, Read C. Van de Water.

A copy of the letter was obtained by the Associated Press late Tuesday.

Orbitz, which was launched last June with $145 million in seed money from five major airlines, has been accused by its competitors of trying to reduce, if not eliminate, competition and pave the way for higher airfares.

Competitors such as Travelocity.com Inc. and Expedia Inc. have asserted that Orbitz’s owners--American, Continental Airlines, Delta Air Lines, Northwest and United--withhold from them certain “Web fares,” the heavily discounted tickets promoted on their own Internet sites.

Orbitz has access to all of its owners’ Web fares, while Travelocity and Expedia have access to just some.

A lawyer for Orbitz, Gary Doernhaefer, said Orbitz welcomed the investigation and that its competitors accusations are “patently false.”

Doernhaefer said if the government were to mandate that all Web fares be sold through all channels, the result would be higher distribution costs and higher air fares.

Orbitz’s argument is that it has struck more deals with airlines for Web fares because it offers a cheaper distribution channel than its competitors. Orbitz says it saves airlines about 30% on each transaction compared with other travel agents or Web sites.

An earlier investigation into Orbitz, which was completed by the Transportation Department before the company’s launch, found no evidence of monopolistic intentions. The new review will compare the operations of Orbitz and its competitors and look into the nature of the contracts between the airlines and the Web sites.