Online travel agencies serve an important role in encouraging a competitive market for airlines, hotels, and rental cars and provide consumers with an efficient way to compare prices; This easy access to comparison shopping has encouraged companies to provide the lowest advertised price, benefitting consumers and encouraging tourism and travel
In a letter to the Department of Justice, the senators said increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition and urged the department to carefully review the merger
WASHINGTON, DC – July 30, 2015 – U.S. Senators Amy Klobuchar (D-MN) and Mike Lee (R-UT) today called on the Department of Justice (DOJ) to closely scrutinize the proposed acquisition of Orbitz by Expedia. Online travel agencies serve an important role in encouraging a competitive market for airlines, hotels, and rental cars and provide consumers with an efficient way to compare prices. This easy access to comparison shopping has encouraged companies to provide the lowest advertised price, benefitting consumers and encouraging tourism and travel. In a letter to the DOJ, the senators said that the merger raises important competition issues and urged the department to carefully review the merger.
“With Expedia’s acquisition of Travelocity earlier this year, Expedia and Orbitz control over 75 percent of the online travel bookings,” the senators wrote.“Increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition. 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.”
Klobuchar is ranking member and Lee is chair of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights. As leaders of the Subcommittee, the senators provide oversight of antitrust enforcement at the DOJ and Federal Trade Commission, monitor the state of competition in a variety of industries, and examine important developments in antitrust law, policy, and competitive markets. Whether involving prescription drugs, airline consolidation, media and video services, wireless and broadband connections, Internet search and other e-commerce, or a variety of intellectual property issues, the senators help ensure that competition thrives and serves consumers.
The full text of the senators’ letter is below:
Dear Attorney General Lynch and Assistant Attorney General Baer:
We write to you regarding the proposed acquisition of Orbitz by Expedia that is currently being reviewed by the Department of Justice. While we take no position about the legality of the merger under the antitrust laws, we do think it raises important competition issues that the Department should carefully review and closely scrutinize.
Online travel agencies serve an important role in encouraging a competitive market for airlines, hotels, and rental cars and provide consumers with an efficient way to compare prices. This easy access to comparison shopping has encouraged companies to provide the lowest advertised price, benefitting consumers and encouraging tourism and travel. In exchange for placement on an online agency’s website, airlines, hotels, and rental car companies pay a negotiated commission on bookings made through the site.
Increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition. While to consumers it appears that there are dozens of options for comparing travel prices, over thirty of the identifiable website names are owned by the three largest competitors: Expedia, Orbitz and Priceline.com. With Expedia’s acquisition of Travelocity earlier this year, Expedia and Orbitz control over 75 percent of the online travel agency bookings.
Although bookings through online travel agencies reflect only 13 percent of the $1.3 trillion travel industry,[1] being listed on a booking website is a critical advertising tool for the travel industry. Online travel agencies provide these companies less expensive and wider access to leisure travelers than alternative forms of booking travel. Many consumers use online travel agencies for research prior to making a purchase. This April, 36 million people in the U.S. checked Expedia. This is more than the number of visitors for any one airline or hotel site. For example, a single, independent hotel or a small regional chain in Minnesota may be able to reach and attract a large number of potential customers in Utah only by having its listing with an online travel agency like Expedia or Orbitz. If the merger occurs, small providers could face increased commission rates without any reasonable alternatives. In turn, they may be forced to increase their prices to consumers to cover the higher commission rates. The issue is whether other options for online, comparison shopping, including recent or potential entrants, will provide sufficient alternatives to prevent any anticompetitive effect.
Additionally, there are allegations that certain smaller booking sites that affiliate with online travel agencies may be using advertising, trademarks and keywords that confuse consumers who may believe they are booking with the official website of a specific hotel when they are booking through a third-party website. These affiliates have access to the online travel agencies’ inventory. Competition can be an effective remedy for this kind of behavior. It is our hope you will consider whether this merger will make it easier for an online travel agency to ignore complaints that some affiliate companies are engaged in deceptive practices.
This merger deserves serious attention. 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.
Thank you for your attention to this matter.
Sincerely,
_____________________________
[1] Trefis Team, Competition Is Shaking Up The Online Travel Market, Forbes, January 5, 2015, http://www.forbes.com/sites/greatspeculations/2015/01/05/competition-is-shaking-up-the-online-travel-market/.
