Expedia: Acquisition Of Orbitz Met With Regulatory Issues

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In the recent months, Expedia‘s buying spree of competing online booking sites has created quite a storm in the industry and scared consumer advocates fearing rising prices due to less competition after a merger with Expedia’s recent target Orbitz.

EXPOrbitz

Now leading U.S. politicians and consumer watchdogs have reacted with written complaints to the Federal Trade Commission (FTC).

John wrote about the Orbitz aquisition by Expedia a few months back (access here).

Minessota Senator Amy Klobuchar, along with the chairman of the Senate Judiciary antitrust subcommittee, Senator Mike Lee, Republican of Utah, recently sent a letter to the Justice Department raising concerns about the Expedia-Orbitz merger.

It can be accessed on the Senator’s website here.

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.”

To get a more comprehensive view of the complaint you should read the entire letter as referenced above. In any way this political pressure is a serious problem for Expedia. And that’s not all!

Last month, the advocacy group Consumer Watchdog (access here) filed an objection with the Justice Department, saying the deal 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.”

“The proposed deal 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,” wrote John M. Simpson, Consumer Watchdog’s Privacy project director, in a letter to the Justice Department.

“Market analysts have estimated that the merger with Orbitz would give Expedia and its affiliates 75 percent of the online travel agent market in the United States,” wrote Simpson.  “The merger would effectively leave a powerful duopoly with Expedia and competitor The Priceline Group Inc. controlling 95 percent of the online travel agency bookings.”

This deal is everything but wrapped up for Expedia as the lobbying against the planned merger seems to increase by the month.

Conclusion

I like to have as many Online Travel Agents (OTA) available as possible to serve my different booking needs. In the case of Expedia and Orbitz there were (or still are) some noticeable differences in the way that each of them have some ‘special fares’ available from local markets such as Bangkok or Singapore. Sometimes the itineraries that are being sold there are very useful and the pricing very good, even lower than on the airlines websites themselves. It’s also useful for Best Rate Guarantees.

Let’s hope that the merger will not be completed as planned and the involved entities have to make some concessions.

 

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