[Ecommerce] House Energy and Commerce subcommittee Hearing on July 18 re online travel site

[Manon Ress]

Dear Colleagues,
Re: July 18 Hearing: "Are All Online Travel Sites Good for the Consumer: 
  An Examination of Supplier-Owned Online Travel Sites."

Some of you asked me if it was about Orbitz and what Orbitz said.  Well, 
yes, it was about Orbitz (as a bad example) but Orbitz was not there!

So, what could have looked like a "public lynching in abstentia" of 
Orbitz (see Rep. Deal (GA) in Tech daily story below) turned out to be 
an examination of a growing e-commerce trend that could affect consumers 
in the long run for more than airline tickets.  Rep. Boucher started by 
mentioning that the colluding of firms like the 5 airlines companies in 
the case of Orbitz, is not different from what's going on in several 
other sectors such as the music industry (how many record companies 
control music distribution?), the movie industry, hotels, currency 
exchange etc...all examples of industries that have created websites to 
control information on the "inventory" and its "distribution."

Rep. Marckey was very funny (Orbitz employee could not find a ticket to 
come to the hearing?) and effective "the issue here is concentration."

In my notes, Rep. Eshoo (CA) also called for legislation ("there's a 
squeeze here" she said) to correct what looks like an elephant ready to 
destroy an ant.  "When the entity controling the inventory is also 
controling distribution, it's a mess."

And it's not over. They're just starting.  As Mark Cooper (CFA) said its 
about disciplining the internet....read more:

Hearing documents are at: 
http://energycommerce.house.gov/107/hearings/07182002Hearing649/hearing.htm

in Tech daily:
http://nationaljournal.com/pubs/techdaily/
Antitrust
House Lawmakers Worry About Orbitz's Impact On Consumers
by Teri Rucker

Members of a House Energy and Commerce subcommittee on Thursday 
expressed worries that Orbitz, the online travel site owned by the 
airline industry, could be costly to consumers. That worry was 
exacerbated by the absence of representatives from Orbitz or the 
airlines at the hearing.

Florida Republican Cliff Stearns, chairman of the Commerce, Trade and 
Consumer Protection Subcommittee, noted that supplier-owned distribution 
channels can offer efficiencies and consumer benefits, but he added that 
with that arrangement there "exists the risk for collusive activity that 
may impede commerce and harm consumers."

Critics of Orbitz claim that the site has entered exclusive contracts 
with its airline owners specifying that Orbitz have access to all 
low-cost fares the airlines offer. Competitors such as Travelocity.com 
say the agreements impede their ability to compete for the business of 
price-sensitive airfare consumers.

Rep. Rick Boucher, D-Va., called on Congress to enact rules similar to 
those applied to customer reservation systems, which require that any 
systems with at least 5 percent airline ownership offer the same fares 
to competing systems.

Sam Gillilan, president and CEO of Travelocity, said he would prefer 
that Congress require Orbitz to end its exclusive agreement with the 
major airlines but added that applying the rule for customer reservation 
systems "in the Internet world would make a lot of sense."

The goal of any rule changes would be to prevent "the vertical leverage 
the airlines are seeking to obtain," said Mark Cooper, research director 
for the Consumer Federation of America. Otherwise, he said consumers 
would be denied the benefits of competition.

Jonathan Zuck, the president of the Association for Competitive 
Technology, who was representing Orbitz at the hearing, said Orbitz' 
agreement with the airlines is nothing more than "an 
inventory-availability clause" that provides low-cost fares because 
Orbitz has agreed to offer lower distribution fees.

But Cooper argued that the airlines banded together because "all hell 
was breaking loose ... with alternate means of distribution" and the 
airlines wanted to "discipline" the marketplace.

Lawmakers complained that the hearing would result in unanswered 
questions because there is "no representative of anyone who is causing 
the problem of concentration of power in one place," said Rep. Edward 
Markey, D-Mass. He quipped that Orbitz and airline employees must have 
had trouble getting a flight.

Markey castigated Orbitz, saying that when the airlines wanted $20 
billion from Congress after the Sept. 11 terrorist attacks, the chairmen 
and every employee at the airlines were willing to visit Capitol Hill on 
short notice, "but when it comes to explaining the benefits to consumers 
... now none can show up."

Orbitz had less than a week's notice of the hearing, said Stearns, 
noting that he would have postponed the hearing one week if someone from 
the firm or the airline industry could have attended then.
Rep. Nathan Deal, R-Ga., attacked the committee for organizing "a public 
lynching of Orbitz in absentia." He defended the company's business 
model and attacked Orbitz' critics, saying they have neither the facts 
nor the law on their side.




-- 
Manon Anne Ress
Essential Information
www.essential.org
PO Box 19405, Washington, DC 20036
mress@essential.org, voice: 1.202.387.8030, fax: 1.202.234.5176