April 8 (Bloomberg) -- Google Inc., the world’s largest search engine, agreed to Justice Department monitoring of travel search and services to win approval of its $700 million purchase of ITA Software Inc., two people familiar with the matter said.
Under the accord, the company would also be subject to compulsory licensing and have to create firewalls on client data, according to the people, who asked not to be identified because the agreement hasn’t been announced.
The resolution of the merger with ITA, an online travel information company, allows the Justice Department to consider a larger antitrust investigation of Google. The Federal Trade Commission, which also oversees U.S. antitrust laws, is exploring a possible probe of Google’s search business, two people familiar with that matter said April 5.
“The licensing condition provides a significant precedent for future deals Google may cut, in particular if they acquire an asset that is widely relied on,” said Rebecca Arbogast, a Washington-based analyst with Stifel Nicolaus & Co. “The monitoring condition represents the first time Google comes under ongoing oversight -- which also shows how the line between a merger review and a larger investigation could blur.”
The ITA consent decree may clear the way for the two agencies to vie for control of a broader investigation of Google, the people said. When both agencies have expertise in an industry they want to probe, they must negotiate which one will handle major antitrust investigations under a formal clearance agreement.
Rivals such as Microsoft Corp. and Kayak.com have accused Mountain View, California-based Google of harming competition.
As part of the so-called consent decree on Cambridge, Massachusetts-based ITA, which provides data for airline ticket fares on online travel sites, the government will seek to ensure that travel search results don’t unfairly favor Google-related businesses, the people familiar with the agreement said.
Adam Kovacevich, a spokesman for Google, declined to comment. Gina Talamona, a Justice Department spokeswoman, declined to comment.
Google rose $1.40 cents to $581.40 at 12:06 p.m. New York time in Nasdaq Stock Market trading. The shares have dropped 2.1 percent this year.
Google is receiving increased scrutiny from antitrust regulators as it expands into new business areas. The European Commission and Texas Attorney General Greg Abbott have begun investigations into whether Google is skewing its search results to favor its own businesses over competitors’ websites.
European Union antitrust Commissioner Joaquin Almunia said today he expects more complaints on Google, given its “extremely large” market share for Web search and advertising. Google has almost 95 percent of the market in Europe, Microsoft said in a blog posting last week citing data from regulators.
U.S. Senator Herb Kohl, the Wisconsin Democrat who heads the antitrust subcommittee, has said he’ll examine Google’s business practices, and Senator Mike Lee of Utah, the panel’s senior Republican, has called for hearings.
Google, which had 65 percent of the search market in February, according to ComScore Inc., is buying companies to boost its online services, spending about $1.8 billion on more than 45 acquisitions last year, according to regulatory filings.
Microsoft Corp., Kayak.com and Expedia Inc. and other Google competitors banded together as FairSearch.org to oppose the acquisition of ITA, which makes software that provides data for online travel sites such as Orbitz Worldwide Inc. They had called on the Justice Department to impose conditions around licensing, search and firewalls if it decided to approve the transaction.
A settlement agreement “is the best possible scenario,” said Henry Harteveldt, an analyst at Forrester Research in San Francisco, who wasn’t privy to the talks. “Google gets to acquire a terrific technology company that can add a lot of value to people. At the same time, companies that are using ITA software get to continue to have access to something they rely on.”