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5 Big Reasons DOJ Will Block Google-ITA

Google's proposed purchase of ITA Software is likely to be blocked by the DOJ for five big reasons.

First, the announcement of a new FairSearch.org coalition of Google's Travel competitors opposed to the Google-ITA deal, which was first reported by Tom Catan of the WSJ, provides the DOJ with most all the elements necessary for the DOJ to block the deal: broad and deep evidence of anticompetitive effects from multiple competitors with deep understanding of the market, a sound theory of the case, and a number of credible witnesses willing to take the stand in court to block the deal.

Second, a key opposition counsel who represents IAC's Expedia, is none other that Tom Barnett, who was the DOJ Antitrust Chief in 2008, who blocked a previous Google attempt to monopolize in the Google-Yahoo Ad Agreement.

  • Mr. Barnett had prepared a Section 1 & 2 Sherman Antitrust case against Google, which successfully prompted Google to drop the agreement.
  • The huge significance of this is that the essential groundwork analysis -- that Google has monopoly power and has attempted to use it to monopolize before -- has already been done in the real world context of Google-Yahoo only 24 months ago.
  • Thus the threshold now is lower than the decision to sue on Google-Yahoo, because DOJ has already decided Google has monopoly power. Now the DOJ only has to convince itself that this particular set of facts, in the Google-ITA case are sufficient to win in court.

Third, the facts in this Google-ITA case are overwhelming. Per the FairSearch.org fact sheet which is derived from the coalition's intimate knowledge of the market, the combination would easily run afoul with the Section 7 standard in the Clayton Act that a acquisition should not "substantially... lessen competition."

  • "More than 30% of all travel searches already begin with Google, the most of any single provider."
  • "ITA has stated that it now powers 65% of carrier-direct flight sales."
  • Simply, what this means is that Google, the market leader in travel vertical search, is seeking to buy the market leader in travel vertical search software; and that combination would enable Google to see most all of the supply and demand in the travel vertical.
  • In other words, ITA houses most of of the competitively-sensitive market information of supply, demand, pricing, and inventory, that Google currently can't see, but if it could, could quickly monopolize the travel vertical.

Fourth, the DOJ has seen that three past Google acquisitions, YouTube, DoubleClick, and AdMob, have turned out in the real world to allow Google to extend its monopoly illegally via its acquisition of market power.

  • See my recent analysis/post on this point: "Google's Acquired Businesses Becoming Monopolies = Market Failure."
  • Simply, DOJ has a ton of real world painful experience with Google about how Google misrepresents market facts and effects to spread its monopolization via acquisition.
  • Given the history and the facts of this case, Google-ITA is likely to be where the DOJ draws a line in the sand on Google's major acquisitions, because the stakes are so high.
    • For enormous detail on the stakes of Google's monopolization see my recent 41 page powerpoint that was part of my recent House Judiciary Antitrust Subcommittee testimony on Google called: "Googleopoly VI: Seeing the Big Picture -- How Google is Monopolizing Consumer Internet Media."

Fifth, the FairSearch.org coalition has accurately framed the consumer harm of this transaction as being that consumers depend on search engines to be honest brokers and the evidence is that Google is not an honest search broker. (See page 25 of this presentation, for the evidence of why Google is not an honest broker in search, and how Google hides multiple serious conflicts of interests from consumers.)

  • This laser-dot accurate focus on whether or not Google actually presents fair, unbiased search results, and whether or not Google discriminates against non-Google-owned content by burying competitors' search results and forcing competitors' advertising rates higher, is exactly the case focus and frame Google most fears.
  • Google understands that if a court does not believe Google's "trust us" assertions that their search is unbiased, a court will be seriously concerned that the combination of Google and ITA Software will be anti-competitive, and support the DOJ in blocking the transaction if Google challenges the deal.
    • Google understands fair search or search neutrality is a huge vulnerability, so much so that the Financial Times and the New York Times both editorialized on search neutrality and Google had to do an op-ed to try and explain its side of the story.
    • Google is worried that the evidence of Google's anti-competitive search discrimination against: TradeComet, MyTriggers, Foundem, Ciao, eJustice.fr, Navx, MyStudioBriefing, and TOTL, will be compelling evidence of an anti-competitive search-bias pattern that the court would find hard to ignore.

In sum, the announcement of the FairSearch.org coalition against the Google-ITA deal is very ominous for Google and the outcome of the deal.

  • My assessment, is that the DOJ is not the FTC here.
  • The DOJ has been tough on Google in opposing the Google-Yahoo deal, the Google Book Settlement twice and Google's anti-competitive collusion to prevent their employees from getting a fair market price for their services.

Google should be very concerned that the DOJ will oppose their acquisition of ITA in court.

 

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