AAI Antitrust Group Argues Against Google's ITA Bid
It's hard to find too many supporters of Google's $700 million bid for travel software company ITA Software these days.
The FairSearch.org coalition of online travel specialists such as Expedia and search providers such as Microsoft Bing have a new ally in their effort to get the Justice Department to strike down the deal.
The non-profit American Antitrust Institute (AAI) published this white paper explaining to all who care (though clearly aimed at educating the DOJ) why the merger should be challenged.
AAI Senior Fellow Randy Stutz wrote Feb. 18:
The Antitrust Division of the Department of Justice (DOJ or the Division) must therefore evaluate the potential competitive effects of a transaction that does not directly accomplish vertical integration in any assumed relevant product market or obviously eliminate actual (as opposed to potential) horizontal competition in any assumed relevant product market, but yet strategically positions a likely monopolist of a nearby and intimately related market to enter the online travel search market with significant competitive advantages. At bottom, the Division will simply have to determine whether the effect of the transaction may be substantially to lessen competition. Under the Clayton Act's standard, which calls for the prevention of anticompetitive dangers in their incipiency, this determination will demand sound predictions within a complicated space.
Wake up! Have a good nap? Me, too. Gotta love citation of the Clayton Act, which was established in1914, to remind the DOJ how to handle mergers between high-tech companies.
The AAI goes on to explain how the DOJ should explore the risk that Google may acquire market power in the online travel search market or the technology input market, along with the risk that Google's control of ITA would not only lead to foreclosure or other exclusionary effects, but whether it raises barriers to entry into the broader online
search market, which Google already dominates.
Apparently the AAI didn't get the memo that the search market is over. You want to innovate and build a new market? Try something new, and don't say social because Facebook has that cornered. Silly rabbit.
If you're against the deal because you agree that it would disrupt the online travel market carefully cultivated by Expedia, Kayak and others, you're probably clapping.
For anyone else, it reads as more of the same recitation of why the deal requires care and feeding.
The white paper, which was incidentally called to my attention via e-mail both by a FairSearch.org spokesperson and the Google-hating Consumer Watchdog advocacy, goes on to explain that acquiring ITA would put Google in command of the leading software online travel agents, travel search Websites and airlines license to search airline pricing and seat availability for trravel searchers.
Indeed, ITA itself admits it accounts for 65 percent of flight bookings for airlines via the Web. That's ironic considering it mirrors Google's U.S. search share. Aren't I clever with math? (Yeah, right, if you only knew.)
Again, this is merely rehashing the FairSearch.org's argument that the deal would put Google in position to put a stranglehold on the online search market.
For example, FairSearch.org believes the deal will allow the company to jack up licensing fees to rivals who want to continue using the ITA data, or in the case of more powerful rivals such as Bing, cut off access to the data.
Google has repeatedly promised not to do either and offered to renew contracts with existing ITA customers.
I sincerely doubt the AAI and FairSearch.org believe the DOJ will block the deal. But what they are likely doing is planting the seeds for the antitrust watchdog to place restrictions on what Google can do with the ITA data in the name of ensuring fair competition. They call this compulsory licensing, which I discussed last month.
And I'm just fine with that. As a Google user, as long as Google can put that travel data in its search engine without restriction, that's great for me.
But I don't think Google, as the overwhelming search market leader, should prohibit Expedia, Orbitz, Bing or any airline from using the data for their consumers. Fair is fair.