U.S. Said to Probe Google-ITA Deal Impact on Searches

The U.S. Justice Department is examining whether Google Inc.’s planned $700 million purchase of ITA Software Inc. would lead to skewed search results for travelers seeking flight and ticket information online, according to two people familiar with the matter.

U.S. officials are concerned Google’s ownership of ITA, whose software aggregates airline information, may cause its own travel services to rank higher than rivals such as Kayak.com and Expedia Inc., reducing competition and hurting consumers, according to the people, who declined to be identified because the talks are ongoing.

“The companies that use ITA want to be assured there would be no preference by Google for its own results,” said Henry Harteveldt, an analyst at Forrester Research in San Francisco, who isn’t privy to the talks. “At the same time, Google’s innovation and creativity shouldn’t be held against it.”

The probe of the Google-ITA deal represents a new facet of government scrutiny for the world’s largest search engine as it expands into new services. Google had 66.6 percent of the search market as of December, according to ComScore Inc.

Google is buying companies to boost its online services, spending about $1.6 billion on more than 20 companies in the first nine months of last year, according to regulatory filings. The ITA deal would follow other large acquisitions, including mobile ad service AdMob Inc. last year for about $700 million and online advertising provider DoubleClick Inc. in 2008 for $3.2 billion. Both were cleared without restrictions by the Federal Trade Commission.

Source: Bloomberg

The webpages of Google, Bing, Kayak and Orbitz are displayed on a computer screen in New York. Close

The webpages of Google, Bing, Kayak and Orbitz are displayed on a computer screen in New York.

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Source: Bloomberg

The webpages of Google, Bing, Kayak and Orbitz are displayed on a computer screen in New York.

Preparing a Lawsuit

Google, based in Mountain View, California, has pressed the Justice Department to decide whether it will challenge the ITA deal, prompting government lawyers to prepare a lawsuit to block it. Completion of the Justice Department’s review may come within a few weeks, one of the people familiar with it said.

Regulators aren’t planning a broad monopoly investigation of Google right now, the people said, and any conditions placed on the ITA deal would be specific to travel-related searches. For now, talks between the Justice Department and Google are focused on how to make ITA’s software available to online travel competitors through licensing agreements, the people said.

FairSearch.org, a group that includes Microsoft Corp. and Kayak.com, a travel information site, has opposed the ITA deal, saying Google would have too big an incentive to steer consumers to its own services rather than to competitors, even if their sites might answer the query better.

Beyond Access

“The proposed acquisition raises issues above and beyond the access to ITA technology,” said attorney Tom Barnett, outside counsel to Expedia Inc., a FairSearch member. “A key threat from the proposed transaction is the combination of ITA’s flight search dominance with Google’s search dominance.”

FairSearch.org argued that, once Google controls ITA’s unique software and the privileged business information on its servers, it might hold back software updates and other innovations. The group also includes Travelocity.com Inc., Hotwire Inc. and TripAdvisor LLC.

“We haven’t received assurances from ITA or Google on any of our concerns in terms of continued access to this product going forward,” Robert Birge, chief marketing officer of Norwalk, Connecticut-based Kayak.com, said in a telephone interview. Birge declined to discuss the company’s conversations with Justice Department officials.

‘Increase Competition’

Adam Kovacevich, a spokesman for Google, said the company is cooperating with the U.S. review of the deal, and added that the “acquisition will increase competition.” Cara Kretz, a spokeswoman for Cambridge, Massachusetts-based ITA, and Justice Department spokeswoman Gina Talamona declined to comment.

Google rose $2.47 to $613.51 at 2:47 p.m. New York time in Nasdaq Stock Market trading. Expedia climbed 1 cent to $25.33.

Google’s deals are receiving careful antitrust scrutiny because of its size and due to the connection between Internet search and online advertising, according to Andy Gavil, an antitrust professor at Howard University Law School in Washington. Gavil said he has received funding from Google for research unrelated to the ITA acquisition.

In November 2008, the Justice Department threatened to sue over its planned alliance with Yahoo! Inc., leading Google to scrap a planned agreement to place ads with the Sunnyvale, California-based web portal.

Several Google acquisitions have gotten a green light from regulators, including the FTC’s unanimous approval of the AdMob deal in May over protests from consumer groups including the Center for Digital Democracy and Consumer Watchdog.

‘Unlikely to Harm’

The FTC said that deal was “unlikely to harm competition in the emerging market for mobile advertising networks.”

The regulator also approved Google’s acquisition of DoubleClick, saying the transaction was unlikely to “substantially lessen” competition in Internet advertising.

Setting conditions for fair search results is an “essentially impossible” task, Assen Vassilev, co-founder and vice president of strategy and development of London-based Everbread, said in an interview. His London-based Haystack airfare search engine supports the Google-ITA deal.

As many as 6 million flight choices are available at any given time depending on whether a traveler wants to stay overnight, is willing to change planes or wants to go to a specific terminal, Vassilev said.

Policing search results under a Justice Department agreement would be challenging, said Robert Lande, a law professor at the University of Baltimore.

The mathematical formulas and programming language behind search engines may be too complex for a third party to decide if there’s a Google bias in the results, he said in an interview.

Comcast-NBC Model

A model for any agreement between the government and Google over the ITA purchase may be the Justice Department’s consent decree for Comcast Corp.’s acquisition of NBC Universal, said Rebecca Arbogast, a technology analyst for Stifel Nicolaus in Washington. It may provide a framework for policing the search industry and licensing the software, she said.

The Comcast agreement, announced on Jan. 18, included safeguards so the largest U.S. cable company couldn’t restrict online video content.

As in the NBC-Comcast deal, antitrust authorities are likely to consider whether Google’s control of key assets through ITA could slow competition or innovation, Arbogast said.

Just as Philadelphia-based Comcast had to make its programming available to internet video distributors, Google may have to make the ITA data accessible to others, she said.

To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net and; Sara Forden in Washington at sforden@bloomberg.net.

To contact the editors responsible for this story: David E. Rovella at drovella@bloomberg.net. Mark Silva at msilva34@bloomberg.net and;

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