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Some Reservations About Expedia's Acquisition of Orbitz

CORPORATE COUNSEL
http://www.corpcounsel.com/home/id=1202734552203?slreturn=20150713152248

A consumer activist group and the hotel industry are both urging the U.S. Department of Justice to block travel-booking site Expedia Inc.’s proposed acquisition of Orbitz Worldwide Inc.

John Simpson, privacy project director of Consumer Watchdog, wrote a letter this week to the DOJ, urging it to block the $1.3 billion deal, which was reached on Feb. 12. The American Hotel & Lodging Association (AHLA) last week issued a similar statement, saying the merger would harm both consumers and small hotel owners and franchisees.

Saying analysts estimate the merger would give Expedia 75 percent of the online travel agent market in the U.S., Simpson wrote, “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.”

He pointed out that Bellevue, Washington-based Expedia already owns several top brands in the online travel market, having acquired Travelocity in January to join Expedia.com, Trivago, Hotwire, Hotels.com and Egencia, among others, in its online stable.

Expedia General Counsel Robert Dzielak was unavailable for comment, but Sarah Gavin, head of Expedia’s communications, told CorpCounsel.com:  "The $1.3 trillion global travel market is more fiercely competitive than ever as evidenced by the sheer number of ways in which people shop for and book travel. We compete with a host of regional and global online and offline travel agencies, meta search sites such as TripAdvisor and Google Hotel Finder, search sites like Google and Bing. . . Expedia’s acquisition of Orbitz will generate cost savings and other synergies that will enable Expedia to better serve consumers and travel suppliers.

"In terms of timing, we continue to cooperate with the Department of Justice. We continue to believe that the transaction should be approved and expect it would then close in the back half of the year."

But the hotel industry begs to differ. On Aug. 6, Katherine Lugar, president and CEO of the AHLA, issued a statement opposing the deal, citing “significant negative consequences.”

“Hotels currently pay Expedia on average 11 percent higher commissions than they pay Orbitz,” Lugar said. “The acquisition could result in Orbitz raising its rates to that level. ... Should this acquisition go forward as proposed, it will result in a duopoly with over 95 percent of the online travel agency bookings in the United States being controlled by two competitors, Expedia and Priceline [The Priceline Group].”

She concluded, “We look forward to the results of the Department of Justice’s careful review of this proposed acquisition.”

Expedia was represented by a Wachtell, Lipton, Rosen & Katz team, led by partner Andrew Nussbaum. In April the National Law Journal (an affiliate of Corporate Counsel) wrote about Nussbaum’s success on three major M&A deals for Expedia in the past year, including Orbitz.

Orbitz was represented by Latham & Watkins attorneys, led by Mark Gerstein and Timothy FitzSimons, who is now with Jones Day in Chicago.