Online Travel Services: The Antitrust Assault on Orbitz – and on Consumers

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Orbitz, which sells airline tickets to travelers overthe Internet, is owned by 5 major airlines and affiliatedwith 30 more. Its charter requires it to displayflight and fare information in an unbiased manner,sorted only by price, number of stops, length of trip,and other basic criteria.

Despite the fact that Orbitz has plenty ofcompetition, other players in the industry havetrotted out antitrust arguments to try to keep itfrom operating or cripple it with regulations.The intensity of the assault should set off alarms,because it is simply the latest example ofantitrust being used to suppress competitionrather than to promote it.

Orbitz was created because the founding airlineshave a strong interest in fostering sources of comprehensive,unbiased information on schedules,fares, and seat availability. Improved informationwill decrease airline operating costs and promotetheir interest in filling as many seats as possible.Orbitz is also introducing new software forbooking reservations. This will introduce competitionand reduce fees in a part of the industrythat now derives market power from governmentregulation. It will also restructure the industry toreflect the new economic realities of the Internet.

The antitrust attack on Orbitz is highly technicaland is directed at provisions of the charterthat require the participating airlines to provideOrbitz with all fares that they make publiclyavailable, which is alleged to create excessivepower over ticket selling. Another cause ofantitrust concern is that Orbitz might in somefashion enable airlines to coordinate, and raise,their fares.

Neither charge is valid. The charter provisionsthat are drawing fire are necessary to the creationof an unbiased information source. The realmotivation of most opponents is their vestedinterest in the status quo.

The seriousness with which the attack isbeing taken by the government, the press, andthe public illustrates a general failing of contemporaryantitrust regulation. Antitrust enjoysan excellent image, primarily because of thebelief that it protects consumers. But in practice,the energy behind antitrust policy often comesfrom firms that are threatened by new arrangements.Pressure from such firms is skewingantitrust policy into a series of efforts to suppressinnovation for the benefit of industryincumbents and to the detriment of consumers.

James V. DeLong

James V. DeLong is a senior fellow with the Competitive Enterprise Institute's Project on Technology and Innovation.