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Industry and Consumer Groups along with Congressman Fight Delayed Orbitz-Expedia Merger

— August 13, 2015

A formidable push is gathering for antitrust authorities to block the proposed merger between online-travel giants Expedia and Orbitz. Congressional authorities, consumer groups, and those within the hotel industry are urging the Department of Justice to strongly consider the antitrust concerns of the merger. Expedia announced the proposed $1.3 billion acquisition in February, shortly after purchasing another former competitor, Travelocity. The original termination date of the deal was August 12th; however Expedia announced early Thursday morning that the date has been delayed three-months until November 12th. Although Expedia did not explain the reason for the delay, it is likely due to pressure from the hotel industry and others. Ranking member of the House Regulatory Reform, Commercial and Antitrust Law subcommittee Hank Johnson (D-GA) also sent a letter to the Justice Department, asking it to carefully consider the anticompetitive nature of the merger. Both the hotel industry’s largest trade group, as well as advocacy group Consumer Watchdog also penned strongly-worded letters to the Justice Department, which is currently reviewing the transaction for antitrust concerns. Expedia has been aggressively trying to compete with fellow market competitor Priceline.

In his letter to the Justice Department, Johnson noted that the recent consolidation would likely lead to an eventual monopoly of the online travel-booking market. Johnson wrote, “In short, where there were four primary competitors in the online travel booking market as recently as last year, there will only be two dominant competitors following this transaction, and potentially even less should the Justice Department approve the merger and Expedia subsequently pursue other acquisitions.” In addition, Johnson has asked the Department to distinguish between booking sites like Expedia and Priceline from online search sites like Kayak. Johnson also urged the Justice Department to adopt a far-sighted view of the deal, and the need for a narrower industry definition. Johnson wrote regarding the matter, “Defining the online travel market broadly would arguably justify the future merger of Expedia and its primary competitor, Priceline. If controlling 80% of the online travel agency market is not anticompetitive, there is little upward limit on further consolidation in online travel agency market.” According to market research group Phocuswright, Expedia, Priceline, and Orbitz, and their affiliates control 53 percent, 31 percent, and 11 percent of the online booking market respectively.

Last week, the American Hotel and Lodging Association, the industry’s main trade group warned that approving the merger would “severely reduce consumer choice in the online marketplace.” The Association’s chief executive Katherine Lugar said, “The merger means less competition, and that is never a good thing for consumers. Lugar and others have noted that hotels pay Expedia roughly 11 percent more in commissions than they do Orbitz, likely meaning the booking rates for Orbitz will rise to meet Expedia’s if the merger goes through. In Consumer Watchdog’s letter, the agency’s privacy director John M. Simpson writes that “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.” Expedia denies that accusation, with a spokeswoman saying that Expedia does not plan on raising hotel commissions if the merger is approved. Expedia cites that research group that many options exist beyond online booking, including the hotel websites themselves, traditional travel agents, and wholesalers. Phocuswright estimates that online booking only accounts for about 17 percent of U.S. hotel booking.

Despite the alarm bells being sound by the deal’s opposition, Conde’ Nast writer Juliana Shallcross notes other changes in the industry that many of the merger’s opponents have failed to recognize. Emerging online travel services from Amazon, Google, and TripAdvisor have all begun ventures to accept online booking in certain markets, and credit cards like American Express are offering their own booking incentive programs as well. Phocuswright executive Douglas Quinby does not believe that the merger will affect consumer prices much, if at all. Quinby notes that most hotels have rate parity agreements with Orbitz, Priceline, and their affiliates, therefore most rates are roughly the same for consumers. Quinby even thinks that Expedia’s marketing strategy, aimed at price-sensitive travelers, could lead to keeping prices low in the event of new market entrants due to its large-scale customer base. Regardless, the pushback against the merger, combined with Thursday’s announced delay, should set up a moderate amount of drama regarding the merger’s ultimate approval. If the Justice Department rejects the proposal, Expedia will be required to pay Orbitz $115 million as per terms of the agreement.



Conde Nast Traveler – Juliana Shallcross

PRNewswire/Consumer Watchdog

The Hill – David McCabe

Wall Street Journal – Chelsey Dulaney



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