Expedia has won approval from antitrust officials to acquire rival Orbitz Thursday, a $1.3 billion deal that some consumer advocates and hotel associations feared would lead to higher prices for consumers and make it harder for small hotels and bed-and-breakfasts to survive.
"We concluded that Expedia’s acquisition of Orbitz is not likely to substantially lessen competition or harm U.S. consumers," Bill Baer, head of the Justice Department's Antitrust Division, said in a statement.
"Many independent hotel operators, for example, do not contract with Orbitz, and those hotels that do often obtain very few bookings from its site," he said. "In addition, beyond Expedia and Orbitz, travel service providers have alternative ways to attract customers and obtain bookings, including Expedia’s largest online travel agent rival, Priceline.
The merger comes amid a tumultuous time for travel sites, which once dominated the search and booking for hotels, air and car rentals. Increasingly, the sites compete with search engines and hotels and airlines that have become more aggressive in reaching out directly to consumers and cutting out online brokers.
Yet the tie-up combines the second- and third-largest online travel agencies in the country. The American Hotel and Lodging Association has argued that the merger would create a "duopoly" between Expedia and Priceline, which will now control 95 percent of the online travel-marketplace, a business that generates $152 billion a year.
Perhaps unbeknownst to many Americans, the vast majority of online booking sites are actually owned by the two companies. Booking.com, OpenTable and Kayak are owned by Priceline. Hotwire and Hotels.com is owned by Expedia, which also purchased Travelocity in January for $280 million. That paved the way for its latest acquisition of Orbitz, which reported $10 billion in bookings last year for airfare and hotel stays.
"As we've said all along, this transaction will result in significant negative consequences for consumers and also the large number of our members who are small businesses and independent hotels," the American Hotel and Lodging Association said in a statement Wednesday. "It could lead to increased distribution costs for independent hotel owners who risk seeing booking commissions rise by double digits."
In July, top lawmakers on a Senate antitrust panel wrote to the Justice Department warning that the deal could end up hurting the industry.
"Increased consolidation among online travel agencies could transform a market that has benefited consumers into one that stifles competition," wrote Sens. Mike Lee (R-Utah) and Amy Klobuchar (D-Minn.).