Google Must Preserve Competition in Online Airfare Search

In a rather complex decision that encompassed a nine-month long deliberation, the U.S. Department of Justice (DOJ) said that, in order for Google Inc. to proceed with its proposed $700 acquisition of ITA Software Inc., the DOJ will require Google to develop and license travel software, in order to establish internal firewall procedures and to continue software research and development.

The DOJ said that the proposed settlement will protect competition for airfare comparison and booking websites and ensure that those websites using ITA’s software will be able to power their websites to compete against any airfare website Google may introduce.

ITA’s travel software provide information related to air flight schedules and pricing for such airlines as American Airlines and United Airlines and such online travel agencies as Hotwire, Orbitz and Kayak.

The DOJ said that the acquisition, as originally proposed by Google, would have substantially lessened competition among providers of comparative flight search websites in the U.S., resulting in reduced choice and less innovation for consumers.

The department said that Google will also be required to provide mandatory arbitration under certain circumstances and provide for a formal reporting mechanism for complainants if Google acts in an unfair manner.

The DOJ’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns of the lawsuit.

“The Department of Justice’s proposed remedy promotes robust competition for airfare websites by ensuring those websites will continue to have access to ITA’s pricing and shopping software,” said Joseph Wayland, deputy assistant attorney general of the DOJ’s Antitrust Division. “The proposed settlement assures that airfare comparison and booking websites will be able to compete effectively, providing benefits to consumers.”

Under the proposed settlement, Google will be required to continue to license ITA’s QPX software to airfare websites on commercially reasonable terms. QPX conducts searches for air travel fares, schedules and availability. Google will also be required to continue to fund research and development of that product at least at similar levels to what ITA has invested in recent years. Google will also be required to further develop and offer ITA’s next generation InstaSearch product to travel websites, which will provide near instantaneous results to certain types of flexible airfare search queries. InstaSearch is currently not commercially available, but is in development by ITA, DOJ said.

“To prevent abuse of commercially sensitive information, Google will be required to implement firewall restrictions within the company that prevent unauthorized use of competitively sensitive information and data gathered from ITA’s customers. The proposed settlement delineates when and for what purpose that Google may use data. Google is also prohibited from entering into agreements with airlines that would inappropriately restrict the airlines’ right to share seat and booking class information with Google’s competitors. Finally, the proposed settlement provides for a formal reporting mechanism for complainants if Google acts in an unfair manner,” DOJ said.

Google, which is the largest search engine operator in the U.S., saw 2009 revenues of more than $23 billion. Cambridge, MA-based ITA Software Inc. is a leading producer of airfare pricing and shopping systems in the U.S.