Google Purchase of ITA Merits Antitrust Concern but Should Pass

 
 
By Clint Boulton  |  Posted 2010-07-03
 
 
 

Google Purchase of ITA Merits Antitrust Concern but Should Pass


Google's $700 million bid for flight information software giant ITA Software July 1 is sure to attract regulatory scrutiny because of the size of the deal and growing concerns about the search engine's sway over the Web.

Some believe Google could use its power to ding those that use ITA's data, such as search engines Microsoft Bing and Kayak.com and online travel companies Expedia and Orbitz. Others believe Google could use its strength in search to shuttle travel searchers to its own offering or jack up fees for ITA's existing software licensees.

However, some experts believe the deal should ultimately pass muster because it represents the search engine's expansion into a new search vertical and the company has already promised to support ITA's existing customer agreements.

ITA sells airlines, search engines and online travel companies software that organizes flight information, including flight times, availability and prices. Once integrated on Websites, QPX allows consumers to compare flight times and prices, two key factors in hunting for airfare.

Google currently dumps information about local businesses and products into its search results, but doesn't integrate flight information into its results. Google will use ITA's technology to build new flight search tools that will make it easier for users to search for flights, compare flight options and prices, and shuttle users to a site to purchase tickets.  

Google CEO Eric Schmidt promised that Google will honor all of ITA's existing agreements with airlines, search engines and travel companies. This is crucial because it will not shut off rival Bing's access to pricing comparison and flight info. Bing uses ITA's QPX software to power the Bing Travel flight comparison Website.

Microsoft, which at 10 percent finds itself struggling to crack Google's 65 percent market share, declined to comment on whether it is concerned about Google's bid.

Orbit spokesperson Brian Hoyt told eWEEK that Orbitz isn't concerned so long as the Federal Trade Commission conducts proper due diligence in gauging the impact of a Google-ITA merger on the online travel market.

However, Kayak, which uses ITA's data to help consumers find flights in its travel search engine, was so concerned about Google's bid that Reuters said it offered to buy ITA to keep the company out of Google's hands. Expedia, TravelPort and others were also rumored to have bid for ITA.

In a discussion with Reuters leading up to the buy, Kayak CMO Robert Birge said: "We are going to watch the potential to abuse dominance. They have dominance on the general search side. When you couple that with ITA's airline relationships, there is reason to be concerned."

Indeed, IDC analyst Hadley Reynolds told eWEEK ITA has built an unassailable position by creating the best and most comprehensive database about air travel and that Google would gain instant dominance of the online flight information industry if its bid comes to pass. He believes ITA's customers have reason to be nervous.

Analysts Mull the Market Meaning of Googles ITA Bid


 

"Clearly Microsoft's Bing would be discomforted by having to buy their flight data from their biggest competitor," Reynolds said. "Kayak, the people's choice flight aggregator, could face a lights out event, similar to Microsoft's strangling of Netscape in the '90s. Even Expedia and Orbitz could be badly damaged if Google chose to build flight bookings into their search. Look for all these parties to oppose this Google move energetically.

"This is another example of Google tying new kinds of services to the virtual monopoly it already exercises in Web search," he added. "Should this acquisition move forward, this administration can be expected to bring it under intense scrutiny immediately."

Google's Schmidt acknowledged he expects a "significant" regulatory review of the deal.

"We think they will spend a fair amount of time going through it trying to understand it both because of the size and the price ... and anything Google does tends to go through [regulatory scrutiny] anyway. We welcome that."

Schmidt's comments never rang truer. The last time Google tried to buy a company with a larger influence on a sector, the Federal Trade Commission scrutinized the deal for possible anti-competitive concerns.

The FTC eventually cleared Google's $750 million bid for AdMob after speaking with others in the mobile ad market and industry analysts, such as Sterling Market Intelligence analyst Greg Sterling.

Given the FTC's embarrassing failure to harness Google in its quest for AdMob, Sterling told eWEEK the deal would incur very intense scrutiny and "there would be a bias against the deal going in from the FTC."

Not everyone believes Google will be halted, largely because Google doesn't really have a travel search offering such as Bing Travel or Kayak.com, making the expansion more vertical and less horizontal.

Forrester Research analyst Henry Harteveldt said this may make Google's bid easier for regulators to stomach against the concerns of online travel companies.

"I wouldn't be surprised if they will be required to commit to making ITA's products available to all who want to continue licensing it, and at commercially acceptable rates (read: no price gouging, and no saying no to Bing Travel if they want to continue using ITA to power Farecast)," he wrote in a blog post July 2.

IDC's Reynolds said Google will have to decide whether to leverage its flight data dominance to build a new and better flight booking experience directly into its search experience or whether it is better served to play nice with its major advertising customers, the airlines and the travel services, and continue to hand off travel purchasers to them.


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