The fulfillment of Google's dream to rule the sky which neared reality with its $700 million acquisition of ITA Software may fail as the U.S. Department of Justice gears up to file an antitrust motion to block the deal.
Bloomberg reported that the Justice Department has not yet decided to sue Google to block the deal. Google has pushed the Department of Justice to take a call, after it invoked a provision of the federal law that requires the government to decide to challenge the deal within 30 days.
In July Google signed an acquisition agreement with ITA Software for $700 million in cash. ITA, a company founded by MIT computer scientists in 1996, develops software solutions for scheduling and airfare search. The software powers flight-comparison service providers like Hotwire, SideStep and Kayak. ITA services are also used by major airlines for airfare pricing like developing offers such as mileage currency. US Airways, Continental Airlines and Alitalia are some of its customers.
However, the acquisition has made major players in the travel domain nervous. FairSearch, a coalition of travel and search websites, which includes Microsoft, Expedia, Sabre Holdings, Farelogix and Kayak, was soon formed. The group has been appealing that the U.S Department of Justice should scrutinize the deal.
The coalition raised concerns that the acquisition of ITA would give Google control over the software that powers most of its competitors. The group further cited that this would result in higher travel prices, fewer travel choices and reduced innovation in online travel search.
However, Google attempted to assuage these fears by stating reasons to the charges brought against it.
Higher Prices and Fewer Choices:
Google stated that ITA and Google are not competitors thus the choice element is not limited by the acquisition. Also, since ITA does not fix prices of air tickets but merely analysis data for airlines the prospects of higher air fare was negated.
Google also stated that it would aid in increasing traffic to travel websites and has no plans to develop its own ticketing services.
Google would end ITA's existing agreements:
Google stated that it would continue to honor existing ITA agreements and also said the ITA is not the only provider of the service as viable alternatives are available in the market citing Expedia's Best Fare as an alternative.
While these concerns continue to exist, research firm Forrester gave a thumbs-up to the deal. It cited that the firms are not competitors. It stated that Google merely powers search and whenever a user searches for cheap airfares on a certain route, it gives thousands of possibilities. Thus, with ITA acquisition it will be able to deliver refined and accurate travel search results.
It also cited that ITA and its clients also stand to benefit from the deal as most of the travel sites fail to gauge a customer's intent when they are searching for prices. Thus with Google's search powered by ITA customers will be required to put in the nature of travel business or leisure and dates, thus allowing travel websites to bid for accurate key words.
However, Forrester also raised concern as to how Google will present the travel websites and airlines and whether the above sites will have to pay Google a fee to list their site in the ITA-powered organic results.
The online travel spending is due to hit $111 billion by 2014 and airline tickets will account for about $59 billion of this spending. And Google has a lot of catching to do in this segment even as its competitor Microsoft has a presence in this market with a 9 percent share through Bing Travel.
Google's earlier attempt to place its ads on Yahoo' site in 2008 was thwarted due to the threat of a similar antitrust lawsuit from the government.