Lawmakers, CW Urge More DOJ Scrutiny of Expedia/Orbitz
House Judiciary Antitrust Law Subcommittee ranking member Hank Johnson, D-Ga., and Consumer Watchdog became the latest to raise concerns about Expedia's planned $1.3 billion buy of Orbitz, which has been facing Justice Department and interest group scrutiny. Johnson said in a Monday letter to Justice that DOJ “should do everything in its power to protect consumers by preventing a duopoly in this market.” Justice is reviewing Expedia/Orbitz after requesting additional information and documentary material in March (see 1503260018). Expedia/Orbitz, originally announced in February, has raised concerns among other groups and lawmakers, who said the deal would effectively give Expedia and Priceline a duopoly in the online travel market.
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Removing Orbitz “as an independent option will severely impact consumers and limit consumer choice,” Consumer Watchdog Director-Privacy Project John Simpson said in his letter to Justice. “Even more concerning, economy travelers stand to suffer the most as these online travel agencies consolidate, since lower-priced lodging options would face the highest increase in commission costs, and consumers rely on online travel agencies to find smaller hotels and lower priced lodging options.” Allowing Expedia/Orbitz would “give the combined company monopolistic control of the online booking market, enabling it to impose higher fees on hotels, which would inevitably mean higher costs for consumers,” Simpson said. Expedia/Orbitz “will generate cost savings and other synergies that will enable Expedia to better serve consumers and travel suppliers,” an Expedia spokeswoman said.
Justice “should narrowly define the relevant market for online travel services to determine whether the proposed transaction is anticompetitive,” Johnson said. He noted the department previously categorized online travel agencies (OTAs) like Expedia separately from travel meta-search engines like TripAdvisor. Only OTAs “offer booking services, which enable consumers to make purchases directly without clicking on a link to an airline or hotel website,” Johnson said. Justice previously determined that meta-search engines mainly appeal to consumers at an earlier stage in the travel planning process, he said.
Johnson and Consumer Watchdog sent letters on the heels of similar criticism from Senate Antitrust Subcommittee Chairman Mike Lee, R-Utah, and subcommittee ranking member Amy Klobuchar, D-Minn., who jointly urged increased Justice scrutiny of the deal in late July. “Increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition,” Lee and Klobuchar said in their letter. “Online travel agencies have become an essential element of the travel industry, and we believe that you should closely scrutinize this merger to determine any effects on competition and the prices available to consumers.” The American Hotel & Lodging Association has also previously criticized Expedia/Orbitz, telling Justice the deal would result in "significant negative consequences."
Justice’s review of Expedia/Orbitz will ultimately be an independent evaluation, but the comments from lawmakers and stakeholder groups are “going to be of notice” in the review, said Babette Boliek, American Enterprise Institute Center for Internet, Communications and Technology visiting fellow, in an interview. “There’s no question that these are concerns that are going to be raised in other contexts.” The scope of the market that Justice examines in its review of Expedia/Orbitz will be a major factor in its final decision on the deal since “depending on how the relevant market is defined, the argument that it would create a duopoly could be legitimate,” Boliek said. “If the market is defined as online travel agencies, then you do have this concern. But that’s probably the narrowest definition you would have.” Justice could choose to examine the deal in the broader context of the overall travel industry, which would shrink Expedia/Orbitz’s share of the market down to about 6 percent, she said. Justice “will need to decide what a proper evaluation is and where consumer interests are best protected,” Boliek said.