With Google-ITA merger, Justice Department continues to expand monitoring role

The Justice Department recently concluded that a deal by Google to buy a travel search firm would “substantially” reduce competition, stifle innovation and leave consumers with fewer choices.

Then it approved the merger — after adding limits on Google’s behavior that will require years of monitoring by the department’s antitrust division.

In two other high-profile mergers, involving Comcast and Ticketmaster, the government threatened to take the cases to court but instead greenlighted the deals after laying out rules for the companies, which the Justice Department will now have to watch.

Not since antitrust officials took on Microsoft in the 1990s has the department taken on this much responsibility enforcing restrictions on some of America’s most dominant companies.

Some experts worry that the agency, now reviewing the blockbuster deal between AT&T and T-Mobile, is trying to regulate complex businesses when it should instead be blocking controversial mergers in court.

“DOJ is not a regulatory agency. That’s not what they’re set up for,” said Ken Davidson, an antitrust lawyer who spent nearly three decades at the Federal Trade Commission. “They’re not set up to regulate the telecommunications industry. They’re not set up to regulate the travel industry,” he said, adding that the FTC has the same weakness.

Justice officials bristled at the notion that they are acting as regulators, arguing that they are not intervening in the markets nearly enough to earn that label. Instead, Justice officials say they are trying to use “traditional law enforcement tools” to fix mergers that would otherwise hurt consumers and competitors.

“There are always ideologues on both sides of the debate. Some want us to block every deal, and some want us to allow every deal to go through,” said Christine Varney, assistant attorney general and head of the Justice Department’s antitrust division. “I’m not an ideologue. I’m a law enforcer making decisions based on the facts and the law.”

In antitrust law, there are broadly two ways to handle a merger that poses a threat to competition. Officials can require a solution that alters a company’s structure — for instance, asking a firm to spin off part of its business. Or, they can limit a company’s behavior in some way.

Observers say Varney has shown an inclination toward the latter. Nowhere has this been more evident than in the division’s recent handling of Google’s acquisition of the software firm ITA.

Google’s purchase gives it control of the technology running most online flight searches. Travel sites including Orbitz and Kayak were initially concerned that Google — which wants to launch its own travel search service — could cut them off from ITA’s technology or charge them exorbitant amounts. The agreement hatched by the Justice Department addresses this worry by requiring Google to license ITA’s technology to existing customers at a fair price for the next five years.

But Davidson, who made sure companies followed their agreements with the FTC, said such remedies can be “very, very difficult to enforce.” Determining the fair price for Google to charge could be hard once ITA is attached to a firm that is motivated to give its own product an edge.

Albert Foer, president of the American Antitrust Institute, wonders what will happen to the companies dependent on ITA’s technology after the agreement expires in five years. Foer said the Justice Department’s penchant for solutions focused on how a firm behaves — rather than how it is structured — is risky.

“Massive . . . firms are being allowed to form in key industries, with the DOJ accepting oversight responsibility for such firms and agreeing to perform a day-to-day monitoring function for which it may be ill-staffed, ill-funded and ill-equipped,” wrote the American Antitrust Institute in response to the Justice Department’s handling of Google’s ITA acquisition.

The Justice Department and some other antitrust experts say government officials have the resources and the expertise to handle the cases. The division has acknowledged its growing load of enforcement responsibilities by moving a top career lawyer to the general counsel’s office to oversee compliance and centralize its monitoring work.

Putting antitrust officials in a position to monitor companies also can lead to a bigger probe. The antitrust case against Microsoft gained steam when federal lawyers alleged the company had violated an earlier deal with the government over the licensing of its Internet Explorer browser.

The department is in the early stages of setting up monitoring for Google’s merger with ITA and for Comcast’s acquisition of NBC. (It is sharing oversight of Comcast with the Federal Communications Commission.) But it has spent roughly a year overseeing Ticketmaster’s merger with Live Nation, a deal that was controversial because it put a number of different businesses— managing artists, running venues and selling tickets — under one roof.

Antitrust officials have not discovered any rule-breaking. But Seth Hurwitz, an independent promoter and co-owner of the District’s 9:30 Club, a Live Nation competitor, said the oversight falls short. Hurwitz, who is suing Live Nation separately for alleged antitrust violations, said the company is breaking rules, set out by the Justice Department, against sharing certain information among its various businesses.

“Are they suggesting that since this merger, there has been no infraction? That seems impossible,” said Hurwitz, also chairman of the company I.M.P. “Everything I’ve seen this office do is merely cosmetic, with the intention of looking busy when they haven’t done anything about anything.”

The Justice Department declined to comment on the specific complaint.

“We continue to pursue vigorously any complaints to ensure compliance,” said Gina Talamona, a Justice spokeswoman.

Jia Lynn Yang is a staff writer at The Washington Post who covers policy and business. Before joining the Post, she worked at Fortune magazine.
Comments
Show Comments
Most Read Business