U.S. Clears Google Acquisition of Travel Software

In a victory with strings attached for Google, the Justice Department proposed a settlement on Friday under which it would approve the search giant’s $700 million acquisition of ITA Software, a maker of travel search software.
After an intensive, eight-month investigation, regulators decided that Google could complete the acquisition, but outlined conditions that will limit how the company uses the technology, licenses it to competitors and handles complaints. The department’s proposed settlement will now undergo judicial review.
The deal is Google’s latest antitrust battle as it faces growing scrutiny from regulators worldwide. It recently agreed to 20 years of privacy audits by the Federal Trade Commission in a settlement over deceptive privacy practices in its introduction of Buzz, the social networking tool. And a federal judge in New York rejected a settlement that would have allowed it to create a digital library, saying it would give too much control to Google’s search engine.
The settlement over the ITA acquisition would be in place for five years, after which Google can use ITA’s technology however it chooses. But because it allows the government to monitor how Google offers travel search, the settlement it would open the door for regulators to collect information that could be used in a broader antitrust case.
“This merger monitoring actually creates an ongoing investigation of sorts,” said Rebecca Arbogast, an analyst with Stifel Nicolaus. “Anything related to search or travel, the government’s going to be permitted to get information, which looks very much like an investigation.” She compared it to early moves the government made in the antitrust case against Microsoft.
The Justice Department said the acquisition, without conditions, would have broken the law by lessening competition and reducing choice for consumers. Under the settlement, Google must continue to license the flight software to other companies and continue to develop ITA products and offer them to other companies. The settlement also said that Google must erect a firewall so it cannot see sensitive information from competitors, and develop a formal reporting mechanism for complaints that Google is acting unfairly.
“It’s important to us that ITA continue with business as usual, providing great service to its business partners,” Jeff Huber, Google’s senior vice president for commerce and local, wrote in a company blog post. “We indicated last July that we would honor ITA’s existing contracts. Today we’ve formally committed to let ITA’s customers extend their contracts into 2016.”
The department’s approving of an acquisition with restrictions is common, said Prof. Herbert Hovenkamp, an antitrust expert who teaches at the University of Iowa College of Law. “The Justice Department operates under what is sometimes called a ‘fix it first rule,’ which is that if you want us to approve your deal, we’re going to instruct you on some changes or terms you have to make.”
Professor Hovenkamp added, “It’s a victory for both sides because the parties get to go ahead with the merger and the Justice Department gets to go to the public and say, ‘We’ve protected you from the anti-competitive possibilities.’ “
Google announced its intention to buy ITA in July, and said at the time that it was bracing for close regulatory scrutiny.
ITA, which was started at M.I.T. in the 1990s, makes software to search for flights and compare prices. Many airlines and online travel agents license the software, including Orbitz, Kayak, American Airlines, United Airlines and Microsoft’s Bing Travel.
Google has said it does not plan to sell airline tickets itself. Instead, it will develop a flight search engine, similar to Microsoft’s Bing Travel, that sends shoppers to the airlines’ own Web sites or to online travel agencies.
It also wants to develop a more advanced kind of flight search. For instance, a traveler could tell Google to find someplace to go that was snowy and fewer than five hours away for less than $300 round-trip, and Google would present different itineraries.
Opponents of the acquisition, including Microsoft, Kayak and Expedia, said they worried that Google would not renew ITA’s licenses so their sites would no longer be able to use ITA’s software. Google could also show its travel results above links to other online travel sites, according to FairSearch, a group formed by companies opposing the deal. Ms. Arbogast said she expected the settlement to include government oversight of Google travel search results, which it did not. 
“The merger review did not impose any substantive search neutrality conditions on Google,” she said. “That remains to be decided another day.” 
FairSearch called the decision “a clear win” in a statement. “The department concluded Google’s unrestricted control over ITA’s key flight search technology would have violated the antitrust laws,” it said. “By putting in place strong, ongoing oversight and enforcement tools, the department has ensured that consumers will continue to benefit from vibrant competition and innovation in travel search.” 
Google has repeatedly said that it would renew the licenses and strike new deals, and that it would not poach traffic from other travel search sites because they get only a small percentage of their traffic from Google.
Christine A. Varney, head of the Justice Department’s antitrust division, has been aggressive about pursuing antitrust cases. But these issues become trickier online, where competition is a click away, an argument that Google often makes.
Google is still fighting other antitrust battles. The Texas attorney general is investigating whether Google has skewed search results in favor of advertisers or its own products and the European Union is investigating Google’s domination in search. Microsoft filed an antitrust complaint against Google in the European Union last month.
Google’s biggest loss was in 2008, when the Justice Department prepared to file a lawsuit to block a search advertising partnership involving Google and Yahoo, prompting Google to walk away from the deal.
Google also suffered a defeat last month when a federal judge in New York rejected a $125 million legal settlement the company had made with groups representing authors and publishers so that it could pursue its ambition to digitize every book ever published and make them widely available. In rejecting the deal, the judge cited antitrust, copyright and other concerns.
But Google has also had its share of victories in antitrust matters. Last year, the Federal Trade Commission approved Google’s $750 million acquisition of AdMob, the mobile advertising company, only after Apple eased antitrust concerns by buying a similar start-up. In 2007, the F.T.C. approved Google’s $3.1 billion acquisition of DoubleClick, the display advertising firm, after Google executives were called to defend it in Congress.