Google faces new regulation in ITA deal
By Jia Lynn Yang,
The Justice Department is poised to make a decision that could fundamentally alter Google’s relationship with Washington.
Antitrust officials are pushing Google to accept limits on its behavior in exchange for government approval of the search giant’s purchase of travel software firm ITA, according to people familiar with the matter. Such an agreement would require ongoing monitoring by government antitrust officials — a first for Google — just as scrutiny on the firm heats up from regulators in the United States and Europe.
Google could still walk away from the deal altogether, or fight the government in court. A decision from Justice could come within a week or so, but some sources cautioned that negotiations could drag out longer.
No matter what, though, Google is facing new regulatory realities after 13 years of operating largely free from government intervention. Last week the Federal Trade Commission announced a major settlement with Google requiring regular audits of the firm following complaints the company violated privacy agreements with users when it launched its Buzz social-networking product.
How Google handles negotiations with Justice over the $700 million ITA merger is a test for new chief executive Larry Page, who took over Monday. He follows Eric Schmidt, a politically savvy executive who worked at Sun Microsystems while it battled Microsoft during the software giant’s seminal antitrust case.
“One of the reasons Google has played hardball so much [is] clearly they don’t like the idea of government oversight,” said a senior official familiar with the company who spoke on the condition of anonymity in order to speak freely about the issue.
So far, the company has not faced an official investigation from the two U.S. agencies charged with preserving fair competition, Justice and the FTC.
Google has also seen two major acquisitions of Internet advertising firms approved by the government: DoubleClick in 2008 and AdMob in 2010. The company walked away from a merger with Yahoo in 2008 when it became clear Justice was willing to go to court to block the deal.
But with every deal it proposes, officials have been getting a better look at the company’s inner workings. Attaching strings to the ITA deal could wedge the door open even wider for antitrust officials, allowing them to study the company for a longer period of time and perhaps gather evidence for a broader case.
The European Union has already launched an investigation into Google’s business and has fielded complaints from companies, including Microsoft, that Google is leveraging its dominant search engine to block competitors.
Google has long argued that its search competitors are “one click away” and that consumers stick with Google because it offers better products.
Critics say Justice should block the ITA deal because the company owns the technology that powers the majority of online flight searches. Orbitz, Microsoft’s Bing and Kayak all rely on ITA.
At the very least, the companies have argued, antitrust officials should require Google to continuing licensing ITA’s product — especially since Google has ambitions of launching its own travel search engine. These companies also worry that Google will rank its travel product higher in its main search results.
Meeting the conditions, however, would require ongoing monitoring by Justice.
Google has said it simply wants access to the company’s software in order to build the best possible travel search engine. The company has said it will not cut competitors off from ITA’s technology.
The Justice Department and Google declined to comment.
“I think people are beginning to really worry about Google and where it’s going,” said Bert Foer, president of the American Antitrust Institute, which released a paper in February saying the government should seriously consider challenging the deal. “It’s phenomenally complicated and growing so rapidly and moving from area to area and getting into travel. The ITA thing has the potential of bringing them into a whole new industry.”