Expert Cites Antitrust Problems, Questions Agency Reports
WASHINGTON, D.C. -Citing “serious deficiencies” in a Department of Transportation report on Orbitz and related comments by the DOT Office of Inspector General, a prominent antitrust expert is calling for action against the near-ubiquitous online venture whose owners and members account for 90 percent of the U.S. air travel and distribution market.
In a new study, “Orbitz Should Still Pop Up on Antitrust Agencies’ Radar Screens,” Progress & Freedom Foundation Senior Policy Counsel William F. Adkinson, Jr. calls for the elimination of the Most Favored Nation provision of the company’s charter association agreement, which effectively ensures that Orbitz can offer all members’ publicly available fares and match special deals offered by competitors.
Adkinson maintains the two studies fail to adequately address concerns that the agreement with member airlines could lead to the exercise of market power and decreased competition. He faults the DOT report and related OIG comments for failing to “adequately address whether the MFN and the Promotional Obligation are reasonably necessary to achieve the procompetitive benefits claimed by Orbitz.” Moreover, he maintains that the comments “underestimate the competitive advantage Orbitz currently holds and the potential to achieve dominance in the future” due to MFN and “focuses on data that shed little or no light” on whether MFN adversely affects discounting via web fares.
“In light of the potential for anticompetitive harm and lack of procompetitive justification, the DOJ and DOT should take action to force Orbitz to eliminate the MFN provision,” Adkinson writes. “Immediate action imposes few costs, since the MFN is not reasonably necessary to realize efficiencies, and offers substantial benefits due to the anticompetitive potential of the clause.”
Adkinson and PFF Senior Fellow and Vice President for Research Thomas M. Lenard wrote an earlier paper on Orbitz, “Revise Orbitz’s Flight Plan: Serious Competitive Risks Outweigh Questionable Benefits,” as well as an article in Antitrust, a journal published by the American Bar Association, “Orbitz: An Antitrust Assessment.”
The Progress & Freedom Foundation is a market-oriented think tank that studies the impact of the digital revolution and its implications for public policy. The Foundation is a 501(c)(3) nonprofit organization founded in 1993.