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Paul Zimmerman
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Hotels Troubled over Potential Expedia-Orbitz Merger

Expedia, Inc. (“Expedia”) is in the works to acquire Orbitz Worldwide, Inc. (“Orbitz”) for $1.6 billion dollars. This news arrives on the heels of Expedia’s purchase of Travelocity for $280 million in January, 2015. The potential acquisition has caused independent hotel owners to go into a state of panic. The American Hotel & Lodging Association (AH& LA) has publicly denounced the agreement, urging the Department of Justice to stop the deal from coming to fruition.

The concern is that the merger would result in higher commission rates for hotels if only two major players, Expedia and Priceline, control the Online Travel Agency (“OTA”) market. This is a particular worry for lesser known independent hotels that depend on OTAs for a large chunk of their bookings. Additionally, many speculate that the deal could hurt travelers by offering less lodging options. Further, the transaction has the potential to cause Orbitz’s commission rates to increase to the level Expedia’s, which are currently 11% higher than those of Orbitz.

In December 2015, Expedia CEO, Dara Khosrowshahi, acknowledged that antitrust issues could prevent the acquisition from going through. On August 11, 2015, Representative Hank Johnson, the House of Representatives’ ranking member of Regulatory Reform, Commercial and Antitrust law subcommittee, sent a letter to the Department of Justice urging its close examination of the merger. If antitrust laws block Expedia’s acquisition of Orbitz Worldwide, Expedia would be forced to pay Orbitz a $115 million termination fee.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.