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Travel sites mobilize to block Google-ITA deal

By Katie Johnston Chase
Globe Staff / October 27, 2010

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To stop Google Inc. from buying ITA Software Inc. in Cambridge, a newly formed group of rival online travel companies will have to convince federal authorities the acquisition would stifle competition and hurt consumers, analysts said.

But if the Internet search giant can show the $700 million deal would benefit travelers — lowering prices or increasing search efficiency — the Justice Department probably would not block the deal.

Four online travel-services companies this week formed a coalition, FairSearch.org, to try to persuade the government to block the acquisition under antitrust law. They are Kayak.com, based in Concord and Norwalk, Conn.; Expedia Inc., which runs Hotwire and Newton-based TripAdvisor; Sabre Holdings, which runs Travelocity.com; and Farelogix Inc.

The group claims that acquiring ITA would give Google control over the software that powers its competitors and allow it to manipulate the online travel marketplace.

FairSearch members Expedia Inc., Kayak.com, and Farelogix Inc. depend on ITA software for at least part of their operations.

ITA said its software powers about 65 percent of online air-travel bookings — the major function of many travel sites.

While a few companies such as Expedia and Sabre have developed their own technology, there are not many other alternatives.

Google handles about 70 percent of all online searches.

“You are combining Google’s dominant Internet search service with the power to steer users in directions that are to Google’s advantage, with the ITA flight search technology, which gives Google the ability to undermine the effectiveness of its competition’s online travel sites,’’ said Thomas Barnett, spokesman for FairSearch. He is Expedia’s counsel and a former head of the Justice Department’s Antitrust Division. “It has the ability to influence both its competition and who gets access to users.’’

All that influence in one company could also drive up advertising costs, causing consumers to pay more to travel, he added.

“If, in fact, Google’s acquisition is going to make it significantly more difficult to compete, it probably is anticompetitive,’’ said Rodney Gould, a Framingham lawyer who specializes in travel and antitrust law. “If there’s something anticompetitive with the merger, the government can step in before the eggs are scrambled.’’

A Boston University law professor, Keith Hylton, disagreed. Laws regarding competition are based on the interests of customers, not companies, he said.

“The purpose of the law is not to protect competitors,’’ he said. “If consumers come out ahead, the department shouldn’t block the merger.’’

Google says purchasing ITA is all about improving the customer experience, and that a deal could expand the range of searches available to travelers.

“The current travel sites are OK if you want to fly from one city to another, but they’re not as helpful if you have $500 in your pocket and you want to fly somewhere sunny in March,’’ said a Google spokesman, Adam Kovacevich. “That’s one of the problems we want to help solve.’’

ITA declined to comment.

Google has promised to honor all of ITA’s agreements with its clients and says it will add new partners.

FairSearch questioned whether Google would renew those agreements or pass along software upgrades to its new competitors.

Companies that license ITA software often customize the product, and Kayak said it has asked Google and ITA not to exploit such advances for their own benefit.

“We’ve asked both companies, ‘Will you agree to these things?’ And they’ve said over and over, ‘no,’ which signifies their intent,’’ said Robert Birge, Kayak’s chief marketing officer. “We’re very concerned. We’re going to be at the whim of their commitment not to be evil.’’

But even if less competition were to result from a Google acquisition of ITA, consumers would not necessarily suffer, Hylton said.

“There are cases in which concentration leads to more efficiency in the market,’’ he said.

Historically, mergers between companies that are not in direct competition are generally not scrutinized as closely as those between competitors, said Gould, but most significant mergers are challenged. The process can help reveal the possible ramifications of companies combining forces.

But, he said, “Google isn’t going to say, ‘Here’s how we’re going to eliminate the competition.’ ’’

Katie Johnston Chase can be reached at johnstonchase@globe.com.

Correction: Because of incorrect information from Fairsearch.org, this story about a coalition of online travel-services companies challenging Google Inc.’s acquisition of ITA Software Inc. included an incorrect description of the relationship between ITA and Sabre Holdings, which runs Travelocity.com. Sabre Holdings is not an ITA customer.

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