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Google-ITA Deal Under Scrutiny

March 10, 2011

The US Department of Justice’s antitrust division, formerly headed by Thomas Barnett, stepped in to break up a Google/Yahoo advertising venture shortly after it formed in 2008.

Barnett, who today is in private practice, again is going after Google.

He is serving as counsel for Expedia.com, which has partnered up with several other online travel sites in an attempt to bring down Google’s $700 million acquisition of flight information company ITA Software.

The members of the FairSearch.org coalition are urging the Justice Department to keep the Google-ITA deal from closing — just as it did in November 2008 with the Google-Yahoo deal.

The coalition is arguing that Google’s purchase of the flight info company would give the Internet search titan too much control over the online travel sector and lead to higher prices and fewer choices for consumers.

“You’re taking the dominant flight search engine company, which is ITA, and you’re combining it with the dominant online search company, which is Google,” Barnett told the AFP news agency. “You’re going to end up with a combined entity that will be positioned to come in and dominate the online travel search space.”

Competition is needed to keep airline fares down, added Steve Kaufer, president and chief executive of TripAdvisor, an Expedia brand and ITA client. “Fares stay low generally because consumers are able to find a wide range of fares from a wide range of airlines on a wide range of sites,” he said.

If Google gets control of ITA it could lead to limited shopping choices, he said, “and that might be good for Google but it’s anti-consumer.”

ITA Software, founded in 1996 by Massachusetts Institute of Technology computer scientists, specializes in organizing airline data, including flight times, availability and prices. Its flight data is used by many US airlines and a number of leading online travel sites, including Expedia’s Hotwire and TripAdvisor, Kayak, Orbitz and Bing search services.

Google said the ITA deal would help it create new tools making it easier for consumers to search for travel, compare flight options and prices and bring more customers to online travel agencies. The Mountain View, California company said it has plans to sell airline tickets or to set airfare prices.

ITA offers a “unique and irreplaceable asset, one that the industry has come to rely on,” Robert Birge, chief marketing officer for Kayak, told AFP.

Google’s ownership of ITA would allow it to limit access to the company’s products, “either by not renewing licensing agreements or by not passing along upgrades,” said Birge.

He also voiced concerns that because of Google’s online search dominance, “if someone is searching for something like cheap flights, Google could intercept that with their own product.”

The Justice Department could enact restrictions on the Google-ITA deal to protect competition, but he admitted that such restrictions would be hard to monitor and enforce. “In this case, the best answer really is to block the transaction,” said Barnett, adding that a decision from the Justice Department is expected “virtually anytime.”

Birge said Kayak has tried to bring talks to the table with Google and ITA about renewing the company’s ITA agreement, which expires in 2013. “We said we’d like to get the contract extended on equitable terms, to get assurances that we’re going to continue to get upgrades, to get assurances that our intellectual property will be protected,” Birge said.

Orbitz, which is not associated with FairSearch.org, had its agreement with ITA renewed last month, which is good until December 2015. The move has been labeled a critical blow to the opponents of the Google-ITA deal.

Microsoft announced its own deal last week for Kayak to power travel search for its Bing search engine.

A spokesman for Google told AFP: “This is just the latest evidence of how fast things are evolving in online flight search, and how much room there is for other players to compete,” referring to the Bing-Kayak deal. “We’re eager to bring more competition and choices for consumers searching for flights online,” the spokesman said.

FairSearch.org members include Expedia, Hotwire, another Expedia brand, Kayak and its brand SideStep, Sabre Holdings and its brand Travelocity, Microsoft, Foundem of Britain, France’s Level and Farelogix.

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