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News Release
June 24, 2002
CONTACT: David Fish
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Orbitz Antitrust Debate Thursday
Lenard Joins Orbitz' General Counsel, Others, at Cato Event

WASHINGTON, D.C. - Orbitz, the online travel agency formed by the five largest airlines, raises serious antitrust concerns, according to Progress & Freedom Foundation’s Senior Fellow and Vice President for Research Thomas M. Lenard. He will debate the matter with the company’s general counsel and others at a policy forum sponsored by the Cato Institute, “Antitrust Flies High: Is the Orbitz Investigation Good News for Consumers?”

Scheduled for noon on Thursday, June 27, at the Cato Institute, the debate will feature Gary Doernhoefer of Orbitz, James V. Delong of the Competitive Enterprise Institute, Andrew B. Steinberg, formerly with, Robert D. Atkinson of the Progressive Policy Institute and Lenard.

In an article in the current edition of Antitrust, “Orbitz: An Antitrust Assessment,” Lenard recommends that the government require Orbitz to modify two aspects of its business agreement and monitor the company’s behavior and growth. He and co-author, William F. Adkinson, Jr., the Foundation’s senior policy counsel, maintain that the most serious concerns are with the Most Favored Nation (MFN) provision and the promotional obligation found in the Charter Associate Agreement with Orbitz’ airline partners.

“The MFN provision of the Associate Agreement raises clear competitive problems and is likely to reduce competition in fare-setting and online ticket distribution,” Lenard and Adkinson write. “There is a serious risk that the MFN will inhibit selective or camouflaged discounting of fares, including discounting by members who feel forced to join to avoid discriminatory fees.” The promotional obligation raises concerns primarily because it “may be met by providing Orbitz fare listings, which are central to competition among distributors, on an exclusive or semi-exclusive basis,” they argue.

These competitive concerns “can be addressed without significant risk of reduced efficiency,” they conclude, by requiring Orbitz to “eliminate these competitively questionable provisions.” The government should also check for signs of increased prices and reduced discounting, as well as for evidence of “the use of Orbitz [by the airlines] for collusive behavior.” The company’s growth should be monitored: “If Orbitz quickly becomes the largest online ticket distributor, the potential for improperly obtained dominance increases,” they write.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



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