In chiming in about the pending Google-ITA Software deal, the American Antitrust Institute warns that Google has become a “one-of-a-kind firm” and that government-mandated limits on Google’s algorithms would likely “be ineffective” and raise free speech issues.
In a white paper, AAI concludes the “merger could lead to an unregulated monopoly” and argues that the U.S. Department of Justice should consider challenging the deal.
“Governmental efforts to protect against manipulation of algorithms by Google are not only likely to be ineffective, but they will necessarily raise First Amendment questions as the government participates in decisions about the prioritization of information reaching the public,” AAI says. “Maintaining competitive markets for both general and niche search may be the only alternative, ultimately, to an unregulated monopoly. It is therefore appropriate for the Division [the Justice Department's Antitrust Division], employing a statute intended to stop monopoly in its incipiency, to work within a public vision of longer-term developments and to place the present acquisition within such a context.”
AAI, founded in 1998, sees itself as somewhat of an activist on antitrust matters. AAI argues that the antitrust regulatory environment is characterized by meager resources, “leading to relatively lax merger and antimonopoly enforcement.”
In fact, AAI has opposed or expressed reservations about many mergers in recent years, including United-Continental, Northwest-Delta, Carnival-P&O Princess Cruises and Google-DoubleClick, to name a few.
All of those mergers eventually took place.
In its white paper, AAI argues that Google and ITA Software will have online travel search firms “surrounded.”
AAI notes that Google would own “the premier technology” used to supply consumers online with airfare pricing and availability data.
“Neither Google nor ITA currently competes in the provision of this data to Internet users by ‘online travel search’ firms, but together they effectively have such firms surrounded,” AAI says.
And, AAI concludes that the merger’s impact could reverberate beyond travel search and into the broader search arena.
“The Division must acknowledge the risk that Google may acquire market power in the online travel search market or the technology input market, along with the risk that Google’s control of ITA would lead to foreclosure or other exclusionary effects, whether directly or indirectly,” says Bert Foer, AAI president. “The Division should also consider whether the transaction might have the effect of raising barriers to entry into the broader online search market, which Google already dominates.”
Adam Kovacevich, a Google spokesman, contends that the AAI analysis is off the mark.
“AAI acknowledges that government should not regulate search results and that the Google-ITA Software acquisition is well within the legal rules governing mergers,” Kovacevich says. “However, AAI then goes onto suggest the application of vague new standards which have no basis in the law. ”
He adds: “Google and ITA Software don’t compete with each other and aren’t potential competitors. We’re excited to offer consumers more choices and competition in flight search.”
Meanwhile, a spokesman for Expedia, which has been battling the deal, sees the white paper as evidence that the best solution would be for the Antitrust Division to oppose the deal outright.
Here’s a statement from Tom Barnett, counsel to Expedia, who headed the Antitrust Division at the Justice Department from 2005-2008.
“AAI’s analysis highlights that combining Google’s general search dominance with ITA’s flight search dominance could enable Google to dominate the online travel search market,” says Tom Barnett, counsel to Expedia. “The paper further describes many of the ways in which Google’s proposed acquisition of ITA could harm competition and consumers, including by undermining users’ ability to find the best travel options, raising travel advertising costs, and increasing airfares.”
Barnett continues: “With respect to potential remedies, the paper concurs in the assessment that behavioral remedies would be ‘tricky’ and could be ‘nearly impossible to police.’Â Â This analysis underscores our view that the best remedy is to block the transaction.”
Meanwhile, in the battle of Institutes, the Technology Policy Institute recently pointed to the benefits of a Google-ITA merger.
“Enhanced travel search capabilities that are part of the Google search engine have the potential to produce significant benefits for consumers,” the Technology Policy Institute says. “Those benefits, and other benefits that could result from other tech acquisitions down the road, may be lost if DOJ (Department of Justice) kills the Google-ITA deal by putting too many conditions on it.”
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The members of fair search.org are clearly making it as hard as possible for google to acquire ITA. From what I have read over the rediculouly long drawn out battle, companies are lobbying congressmen, having debates on CNN, buying rival banner ad campaigns on TNOOZ (which I find comical and childish), etc. If the deal were to go through, why on earth would google extend contracts to some of the fair search members after such a long and expensive legal battle? Either google gets Ita and becomes a monopoly, or they don’t, and build their own ita and direct all travel inquiries to their own product. Am I missing anything here?
It’s ridiculous how much this deal is being scrutinized.
It’s important to remember that this is a sub-billion dollar deal and it’s getting much more scrutiny and input than the multi-billion dollar Comacast/NBCU merger, obviously there are much politics at play here and the lobbying of Google’s competitors is intensifying, they are trying to convince the gov’t that this deal might effect the consumers (which it won’t, it has nothing to do with consumers) it might only have an effect on Expedia’s inferior service.
David: Yes, this deal is getting intense scrutiny. You say it won’t impact consumers. Hmmm…. one thing both sides agree on is that it indeed affect consumers. Google says it will provide more consumer choice and the opposition says such monopoly power will only hurt consumer choice and stymie innovation.