ASTA issues Letters to DOJ, DOT Regarding G2 Switchworks

The American Society of Travel Agents (ASTA) issued letters Monday to the U.S. Departments of Justice and Transportation, asking that they look into the circumstances leading to last week's announcement by G2 Switchworks (G2) that it has signed long-term agreements with seven major airlines that "designate G2 as a provider of choice for alternative-GDS distribution services between them and key agency clients." G2 is a new entrant into the travel distribution market.

In its letter to Hon. R. Hewitt Pate, the assistant attorney general, Antitrust Division, U.S. Department of Justice (DOJ), ASTA wrote, "As attractive as G2's claims to technological superiority may sound, there are complex business issues involved in the entry into the travel information aggregation business, not the least of which is how the entrant's system will interact with established automated accounting systems that most retailers use. The government should not, therefore, assume that G2's claims will necessarily or automatically lead to a cost-breakthrough or other market-stimulating innovations. ... In the meantime there is an indication that the airlines are once again poised to involve themselves in the ownership and, possibly, control or significant influence of a firm with GDS-like characteristics."

The Department of Transportation (DOT), ASTA noted in its letter to the DOJ, had said previously in adopting the final rule in the recent CRS rulemaking proceeding, "...  our decision that most of the current rules should not be readopted in large part reflects the complete divestiture by U.S. airlines of their CRS ownership interests. A system's ownership by U.S. airlines would raise competitive concerns. The Justice Department thus states, 'Finally, DOJ's recommendation assumes that the recent divestitures represent a permanent change in the ownership structure of the industry. DOT should therefore make clear that any attempt at reintegration into CRS by airlines will be closely scrutinized by the appropriate enforcement agencies.' ... As we stated above, we already intend to monitor airline distribution developments during the next six months and beyond. We will pay particularly close attention to any airline efforts to establish control over a system. We retain the authority to bring  enforcement cases against firms that violate the statutory prohibition against unfair methods of competition, and we will take appropriate action if we have evidence of unlawful conduct."

Given the DOT's statement, coupled with G2's announcement, ASTA urged the DOJ to undertake immediate inquiry.

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