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Orbitz.com hired its first general counsel, Gary Doernhoefer, just in the nick of time. Founded only a year ago, Chicago-based Orbitz, Inc., already faces a spate of legal headaches, including a string of federal and state probes into the fairness of its business practices. The U.S. Department of Justice, the U.S. Department of Transportation, and the attorney general’s offices of several states, including California, Florida, Iowa, New York, and Pennsylvania, are all on Orbitz’s case. That’s a lot of grief for a Web site that isn’t up and running yet because of logistical problems. Even so, this is a case to watch, because it takes on a question that faces all industries: the antitrust limits to Web commerce site collaboration among competitors. Competitors fear that Orbitz will dominate its field — the online travel market — which is estimated to reach $20 billion this year. Rivals Travelocity.com, L.P., and Expedia, Inc., claim that Orbitz will get preferential fares from its major airline backers — American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, and United Air Lines, Inc. — which now control 80 percent of the domestic market. They say that the site will give airlines too much power over selling and pricing tickets and that customers will end up paying more. Not so, says Doernhoefer, 43, who comes to the controversial business fresh from a stint as senior counsel of government affairs at Fort Worth, Texas-based AMR Corporation’s American Airlines in Washington, D.C. (He started his career in the Denver office of Chicago’s Mayer, Brown & Platt after graduating from the University of Chicago Law School in 1984.) Doernhoefer says the mud-slinging shows that the Web travel business is just getting nasty and competitive. Travelocity and Expedia dominate 70 percent of the market, he notes. “Let’s not be coy about it,” he says. “I don’t doubt our competitors are behind the investigations. It’s no accident that Sabre, the majority owner of Travelocity, is leading the charge.” Travelocity and Expedia, according to Doernhoefer, are running scared. Unlike competitors that promote certain carriers, he explains, Orbitz presents a neutral site that will provide more complete information about fares. Orbitz, he claims, also will use a much more powerful search engine than other travel sites. This efficient new business model will result, he says, in a 30 percent savings in booking fees for its five investors and more than two dozen nonequity “charter associates.” All told, he expects Orbitz to give Travelocity and Expedia a real run for their money. “Orbitz isn’t even a competitor yet,” scoffs Bruce Charendoff, Travelocity’s senior vice president. “Orbitz today is no more than vaporware,” he adds, noting that Orbitz’s much-hyped gadgetry isn’t even operational yet. Travelocity, on the other hand, he says, is a “real business” with more than 23 million registered members. And, he says, there’s plenty of room for another player in the Web travel sandbox. Except, he says, Orbitz is not playing fair. Orbitz’s business plan, claims Charendoff, was designed to restrict the flow of critical fare information to other Web sites and cut off competition. He is optimistic that the government will weigh in with restrictions before Orbitz is finally launched. Industry experts also foresee air pockets in Orbitz’s future. The company has a late start and will have to go a long way to generate consumer and brand awareness, says Paul Keung, an analyst with the New York-based investment firm CIBC World Markets, the U.S. division of the Canadian Imperial Bank of Commerce. Orbitz’s cooperative airline ownership arrangement will continue to invite scrutiny from regulators, Keung predicts. Doernhoefer is unrattled by such turbulence alerts. Maybe that’s because he’s genuinely fascinated by the industry and has the right resume to fight its battles: Besides being an aviation buff and amateur pilot, he’s garnered almost a decade’s worth of legal and lobbying experience at American Airlines, where he was the lead lawyer for international antitrust matters (he worked on the big airline price-fixing litigation in the early nineties, and on various airline alliance issues over the years). These days, his antitrust expertise is running on overtime as he jets across the nation seeking to pacify federal and state officials. Doernhoefer says that he gets an intellectual charge from that kind of work, calling it his “favorite part of the job.” Given his competitors’ clamoring and the ongoing government probes, which Doernhoefer hopes won’t drag on for more than a year, he probably won’t have to give up his pastime anytime soon.

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