Tuesday, April 12, 2011

Justice Department Approves Google Acquisition of ITA, Subject to Conditions

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

Google is a step closer to completing its proposed $700 million acquisition of travel search provider ITA Software, Inc. The Department of Justice has announced that it would approve the merger, provided that Google met certain conditions designed to alleviate competition concerns.

On April 8, the Department of Justice Antitrust Division filed both a complaint to block the merger and a proposed final judgment settling the suit in the federal district court in Washington, D.C. At the conclusion of a 60-day public comment period, the court may approve the proposed settlement, if it deems the settlement to be in the public interest.

Massachusetts-based ITA Software is a leading producer of airfare pricing and shopping systems in the United States. ITA’s QPX software conducts searches for air travel fares, schedules, and availability. QPX is used by travel companies like Bing Travel, Travelocity, Kayak, and Orbitz, as well as multiple airlines, to search for air travel fares, schedules, and ticket availability.

Competition Concerns

Soon after Google announced its plan to acquire ITA last July, a dozen online travel websites formed a coalition called FairSearch to block the deal. Google responded by launching its Facts about Google’s acquisition of ITA Software website to tout the benefits of the merger and to address antitrust concerns.

Google’s original proposed purchase of ITA “would have substantially lessened competition among providers of comparative flight-search websites in the United States,” according to Joseph Wayland, Deputy Assistant Attorney General of the Department of Justice’s Antitrust Division. “The proposed settlement assures that airfare comparison and booking websites will be able to compete effectively, providing benefits to consumers.”

Proposed Settlement Agreement

Under the terms of the proposed settlement agreement, Google would be required to:

• Continue to license ITA’s QPX software to airfare websites on commercially reasonable terms;

• Continue to fund research and development of QPX at least at similar levels to what ITA has invested in recent years;

• Develop and offer to travel websites ITA’s next generation “InstaSearch” product, which “will provide near instantaneous results to certain types of flexible airfare search queries”;

• Refrain from entering into agreements with airlines that would inappropriately restrict the airlines’ right to share seat and booking class information with Google’s competitors;

• Provide mandatory arbitration under certain circumstances and provide for a formal reporting mechanism for complainants if Google acts in an unfair manner; and

• Establish internal firewalls to prevent unauthorized use of competitively sensitive information and data gathered from ITA’s customers. The proposed settlement restricts Google’s use of such data.

The proposed five-year settlement, along with the Justice Department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to James J. Tierney, Chief, Networks and Technology Enforcement Section, 450 Fifth Street, N.W., Suite 7100, Washington, D.C. 20530.

In an April 8 post on the company’s official blog, Google Senior Vice President Jeff Huber stated: “We’re excited that the U.S. Department of Justice today approved our acquisition."

He added that Google would honor ITA’s current contracts, and both existing and new customers will be able to license ITA’s QPX software on “fair, reasonable and non-discriminatory terms” into 2016.

Concerns about Google’s Dominance

While the proposed settlement agreement has alleviated many concerns about Google’s purchase of ITA, consumers, businesses, and lawmakers continue to be troubled by Google’s dominant position in the search market.

“Consumers won this round, but we must remain vigilant,” FairSearch said in a statement following the Justice Department announcement. “Online competition remains at risk across travel and other economically significant vertical markets of search, information and online and mobile commerce.”

Senator Herbert Kohl (D-Wis.), Chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, said in a release that his subcommittee intends to continue to investigate “broader questions about the fairness of Google's search engine, and whether it preferences its own products and services to the detriment of competitors.”

Senator Mike Lee (R-Utah), Ranking Member of the Antitrust Subcommittee, also issued a statement calling for continued scrutiny of Google as the search engine “extends its reach into a variety of vertical search markets and online services.”

“[T]he real problem is Google’s ongoing anticompetitive practices based on its monopolistic control of search,” said John M. Simpson, Director of Consumer Watchdog’s Privacy Project, in a news release.

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