Expedia's purchase of rival online travel agency website Orbitz will be approved by the Department of Justice, according to a new report. Approval of the deal was in question because it will result in a huge online market share for Expedia, but the deal shouldn't affect travel prices much.
A new report citing an inside source claims that the purchase of Orbitz by longtime rival online travel website Expedia is as good as done, as the Department of Justice is set to approve the merger. The two websites combined will command an estimated 73 percent of the online travel agency market, and leave only one other major player, Priceline, in the mix.
Despite what appears to be a near-monopoly created by the combination of the two travel websites, the merger is expected to be approved because there are so many additional ways in which purchasers can buy travel other than through online travel websites. Besides purchasing tickets and lodging directly from airlines and hotels via their own websites or calling directly, customers can also use traditional travel agencies as well as the websites of regional tourism boards. Therefore, even after the merger, the combined Expedia-Orbitz empire will still command only about 10 percent of the total travel sales market in the U.S.
Another reason the merger will be approved is that the unprofitable Orbitz has been seeking a buyer for awhile and has no other compatible suitors besides Expedia. When regulators consider antitrust concerns, a concept known as the "failing company doctrine" applies. If one of the two companies attempting to merge is expected to fail otherwise, even if the merger would create a near-monopoly, it is considered a better option than allowing one company to go out of business.
Although consumers are understandably concerned that the merger will result in higher travel prices, this is not likely to be the result. Airfare prices are generally set by the airlines themselves, and a quick search will show that both Expedia and Orbitz already offer identical air rates. As far as hotel rates go, the two sites combined will still cover only 15 percent of hotel room bookings, leaving plenty of room for competition.
