American Airlines and Orbitz tangled in antitrust battle

American AirlinesThe online travel agency battle continues … and it’s getting ugly. The latest move comes from American Airlines, which is suing Orbitz and Travelport for alleged anticompetitive behavior. So, what started in November as a battle over fare distribution has escalated into an antitrust war.

Through the end of the year, Orbitz and American Airlines fought it out, ultimately winding up in court, where American emerged victorious. Along the way, the two sides in this commercial combat – travel suppliers, such as airlines, and online travel agencies – found other fields of battle, with Expedia, Delta, CheapOair and BookIt among those entering the fray.

American is claiming that Orbitz is trying to “control the distribution of airline tickets,” according to a report by legal magazine Corporate Secretary. The article gives some insight into the legal aspects of what’s happening:

‘The lawsuit raises innovative but real questions about market power and behaviors in the current airline structure,’ says Spencer Waller, professor and director of Institute for Consumer Antitrust Studies at Chicago-based Loyola University. ‘But I don’t think this lawsuit will get to a resolution on the merits of antitrust claims. I view this case primarily as a continuation of the dispute and negotiations over fees in the online travel agency.’

For American, the disintermediation of online travel agencies would lead to direct ownership of the consumer, as well as wider margins on each transaction. Corporate Secretary continues:

‘The dispute raises real antitrust concerns because firms have substantial market power, and higher fees are being generated that are being passed on to consumers,’ Waller adds. ‘The antitrust law is looking at it from a consumer perspective and in the end, this law would want the airlines to produce lower fees.’

We hit a period of calm earlier this year, but the war in the travel industry is heating up once again. The parties are back in court, only a few months after American’s last victory, and it looks like we’ll all have to wait for the judge.

You can read American’s filing here.

China Airlines fined for price fixing

China Airlines is the latest carrier to get fined for price-fixing air cargo rates. The Taiwan-based airline plead guilty and now faces a $40 million fine. Northwest Airlines has also plead guilty.

A total of 18 airlines have been snared by the Department of Justice in an ongoing investigation. Eight airline executives have also been charged. The Department of Justice has imposed a total of $1.6 billion in fines and given four executives jail time for a conspiracy that reaches back to early 2000. China Airlines was conspiring with other airlines to fix cargo rates to and from the United States, a violation of antitrust laws. Rates are supposed to be subject to the free market, but the airlines secretly agreed to set a rate in order to maximize profits.

For a complete list of the airlines and executives involved, click here.

World Cup travelers outraged by high airfares

Eager fans headed to this summer’s World Cup in South Africa have been finding plenty of frustration due to sky-high airline prices. According to a story in today’s Sydney Morning Herald, there may be a reason why: South Africa’s two main carriers are currently under investigation due to allegations of price collusion.

South Africa’s antitrust “Competition Commission” recently began an investigation of South African Airways and the country’s budget carrier Mango. Both carriers are suspected of agreeing to keep airfare prices artificially high during the ever-popular World Cup, with the country expecting around 350,000 visitors. Other airlines targeted by the probe include British Airways and partner Comair, as well as 1Time. South African Airways has offered to cooperate with the investigation in exchange for immunity from prosecution.

Is behind-the-scenes price fixing at work? The jury is still out, though the $1700-1900 tickets we found on Kayak from New York City did not exactly remove our doubts. Tickets to South Africa have never been cheap, and the higher demand during World Cup is sure to keep prices up as well. If you’re heading to South Africa for the Cup this summer, make sure to have good look around the airfare sites at prices before you purchase.