Fed's Watchful Eye Over Google in Travel Search Makes Critics Very Happy
Time for a vacation!
After roughly nine months of antitrust scrutiny, the justice department has approved Google’s acquisition of ITA, acting quickly before the government faces a potentially shutdown due to budget disputes. And, not surprisingly, all parties involved are claiming victory.
Google announced an agreement to acquire ITA Software, a Cambridge, Massachusetts flight information software company, for $700 million in July 2010.
The acquisition was immediately identified as a threat to companies, such as Kayak and Orbitz, which rely on ITA’s data. Likewise, the federal regulators took the opportunity to take a close look at the deal’s ability to fuel Google’s continuing search dominance. However, the deal was largely expected to be rubber stamped because it represented a vertical expansion for Google, and not a gain in general market share.
The concessions laid out by the Department of Justice today has calmed the nerves of the deal’s harshest critics.
“This is a clear win from our perspective,” said Tom Barnett, counsel to Expedia, and former head of the Antitrust Division of the U.S. Justice Department during a call organized by FairSearch.org, an advocacy group that opposed the acquisition. “We are very happy about that, but we are also aware of the fact that this is one transaction in one section of the Internet. We do think that it’s important that people bare that in mind and remain vigilant.”
The two biggest concerns by ITA’s customers was that the company’s data would remain available to them and that Google would not have access to their proprietary data.
Under the terms of the agreement, the department will require Google to establish internal firewall procedures to ensure competitors’ intellectual property and that ITA’s customers will be able to extend their contracts into 2016. New customers are also ensured that they will be able to license ITA’s software on “fair, reasonable and non-discriminatory terms” into 2016. What’s more, the proposed settlement provides for a formal reporting mechanism for complainants if Google acts in an unfair manner.
On the same call, Kayak’s Chief Marketing Officer Robert Birge, said that Google’s likely happy with the terms because it got what it ultimately wanted — to acquire ITA. But that doesn’t mean that the terms weren’t vigilant enough to make customers of ITA happy, too.
“Their deal got cleared, so of course they are going to spin it how they like, but the Justice department has taken action to ensure competition. We are still looking at the specific details, but from a cursory look, it’s clear they protected our access and have protected our own proprietary technology that we’ve developed over the past seven years. It’s unambiguous to us that this is pleasing to us.”
We’re sure the deal’s closure after nine months also is pleasing to ITA’s investor list.
As soon as the court accepts the Justice Department’s proposal, you can imagine the $700 millions being distributed to all parties involved. In 2006, ITA closed $100 million in equity investment. Its investor list includes: Sequoia Capital, Battery Ventures, General Catalyst Partners, PAR Investment Partners and Spectrum Equity Investors.
In a short statement by Google, Jeff Huber, Google’s SVP of Commerce and Local, was enthusiastic about the Justice Department’s actions: “We’re moving to close this acquisition as soon as possible, and then we’ll start the important work of bringing our teams and products together. We’re confident that by combining ITA’s expertise with Google’s technology we’ll be able to develop exciting new flight search tools for all our users. Up, up and away!”
This doesn’t mean that Google is entirely in the clear.
As Digital Daily’s John Paczkowski wrote earlier this week, Larry Page has a lot to look forward to as his tenure as CEO, such as a European probe of the company’s search and advertising operations, a Texas investigation into allegations of “manual overriding or altering of” search result rankings, and perhaps that long-in-the-works Federal Trade Commission probe.