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Good
morning. I would like to welcome you all to this hearing of the subcommittee on
Commerce, Trade and Consumer Protection entitled: “Are all Online Travel Sites
Good for the Consumer: An Examination of Supplier-Owned Online Travel Sites.”
I would like to especially thank our witnesses on behalf of the Committee for
their appearance and testimony.
Notwithstanding
the hyper-enthusiasm for all things Internet and electronic commerce of the
recent past, the fact remains that the Internet as an efficient, ubiquitous
communications tool has substantially transformed, in fundamental ways, commerce
as we have known it. Electronic commerce traversing the communications network
that is the Internet is real, substantial and rapidly becoming a key component
of our economy. The hyper-predictions of not so long ago that e-commerce will
reach $3 to 4 trillion dollars by 2003 may not have come true, but by most
estimates, the value of business-to-business commercial transactions that
transpire online is well over $1 trillion today. More significantly, the rate of
growth of such business-to-business transactions is increasing unabated and it
is far in excess of the growth rate for offline commerce.
Business-to-consumer
e-commerce may also have not meet the glorious predictions of the pundits who
rained during the .com bubble, but the fact remains that it has grown
substantially and it continues to grow at rates unmatched by offline commerce.
One of the more stellar examples of business-to-consumer e-commerce growth is
the online travel business. For example, in just over three years, 15% of all
airline tickets are now being sold online and the growth rate for such
transactions is still accelerating. More
significantly, increasingly consumers are seeking and receiving more advanced
travel services through online travel sites, such as arranging multi-city or
even country trips involving a myriad of reservations for air travel, car and
hotel reservations and tours.
During
the .com bubble it seemed that any and all business models were tried, as
investors, in their euphoric state vis-ŕ-vis “anything Internet” had the
penchant to welcome and accept them all. As the dust settled and we learned that
while selling books online made sense, selling groceries didn’t, a “sort”
of new business model has gained in appeal among dominant suppliers in certain
industries. That “sort” of new business model calls for the dominant firms
within an industry to collectively create an online distribution network for
their goods and services. In practice this business model has manifested itself
in a number of supplier-owned online distribution joint-ventures, where the
participating companies tend to be the top five or six in the industry. These
supplier-owned online distribution joint-ventures are now present across a
number industries, including the air travel, lodging, cosmetics, music, and
foreign currency exchange.
There
is no question that such supplier-owned online distribution systems engender
economic efficiencies and consumer benefits. At the same time, there is also no
question that any time competitors come together in collaborative efforts, such
as these joint-ventures, there exits the risk for collusive activity that may
impede commerce and harm consumers. This hearing is meant to create an
educational forum to examine both the benefits and possible risks that
supplier-owned online distribution systems hold for the American consumer. As
examining supplier-owned online distribution systems across the multitude of
differing industries within which they appear would have been a tall order for
one hearing. Therefore, this hearing will focus only on online joint-ventures in
the air travel and lodging industries.
We
have before us great expert witnesses on the issue. We had hoped to have Orbitz
and at least one of the five major airlines that own it to speak to Orbitz’s
business model directly. Unfortunately, due scheduling conflicts they were
unable to attend. However, Mr. Gary Doernhoefer, Vice President and General
Counsel of Orbitz, L.L.C. has provided the subcommittee with written testimony
on behalf of Orbitz, which I now offer to be included as part of the record.
I
want to add that in a Washington Post article on June 19, I was quoted as saying
that I intended to hold a hearing on this subject prior to the August recess.
I attempted to accommodate the interests of these parties by offering to
delay this hearing until next week, however there were still scheduling
conflicts and that is why we are proceeding today.
I
thank the witnesses and look forward to their testimony.
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