Should Orbitz Be Grounded Before Takeoff?



Allowing the five major airlines to collaborate on online travel site Orbitz.com will cost consumers $3.2 billion over the next seven to 10 years, charges a recent study by the Interactive Travel Services Association, a group of online travel sites that will compete with Orbitz.

The study's author, MIT professor of economics Jerry Hausman, predicts that Orbitz "will allow its airline-owners to jointly agree on anticompetitive provisions that they could not enforce individually." Hausman says the result will be chilled competition, reduced innovation, and harm to low-fare airlines.

"I'm not sure what the ultimate goal of Orbitz is," says ITSA executive director Antonella Pianalto. "But we are concerned about the clauses that give it exclusive fares that will not be available anywhere else." Pianalto is also skeptical of a most-favored notion clause that says the participating airlines--American, Continental, Delta, Northwest and United--must make available to Orbitz any deals they cut elsewhere.

Meanwhile, inspector general Ken Meade of the U.S. Department of Transportation, which is reviewing Orbitz, has been quoted saying a decision on whether the site is anticompetitive is close. The site, which is in beta tests, is scheduled to debut in June.

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