Google's Purchase of ITA Software May Be Challenged by U.S.

Google Inc. may face an antitrust lawsuit by the U.S. Justice Department over its $700 million acquisition of ITA Software Inc., according to people familiar with the situation.

Department officials haven’t made a final decision about whether to sue to block the purchase by Google, owner of the world’s most popular search engine, said the people, who requested anonymity because the agency discussions are confidential. Google announced in July its plans to acquire ITA, which provides online airline flight and ticket information. The next month, government lawyers said they were extending their ITA investigation.

Google triggered preparation for the government’s possible lawsuit last month by invoking a provision of federal law that forces the government to decide within 30 days whether to challenge the deal, the people said. In bringing the matter to a head, they said, Google prompted Justice Department lawyers to cancel Christmas holiday plans and put together a case.

“It could be Google did that because things are not moving forward,” said Andrew Gavil, a law professor at Howard University in Washington, in an interview. “As a business matter, it can be very difficult” to manage an acquisition if there is a probe.

Gavil, who said he has no direct knowledge of the progress of the investigation, received funding from Google for research unrelated to the ITA acquisition.

Opposing the Deal

A group of software and online travel companies including Microsoft Corp., Expedia Inc. and Sabre Holdings Corp.’s Travelocity have been leading opposition to the acquisition. They helped form FairSearch.org to highlight concerns that Google would prevent others from using ITA’s technology.

Expedia rose 47 cents, or 1.8 percent, to $27.12 in Nasdaq Stock Market trading as of 3:50 p.m., and Orbitz Worldwide Inc., which supports the acquisition, gained 7 cents, or 1.3 percent, to $5.53 in New York Stock Exchange trading. Google fell 18 cents to $616.69.

Adam Kovacevich, a Google spokesman, declined to comment on the deadline or the department’s preparation.

“While we continue to cooperate with the Justice Department’s review, we are ultimately confident that this acquisition will increase competition,” he said in an e-mail.

In an e-mail, Gina Talamona, a department spokeswoman, declined to comment because the matter is pending.

Both parties can negotiate an extension of the 30-day deadline under federal law.

Urging a Challenge

“I believe the Google-ITA deal is uncompetitive and should be challenged,” said Pamela Jones Harbour, a former member of the Federal Trade Commission who dissented in 2007 from its decision to let Google buy DoubleClick Inc., an online advertising company. “It’s a dominant firm expanding in an adjacent market by acquiring ITA, and the effect would be to dominate flight search.”

Harbour is a partner in Fulbright & Jaworski LLP’s antitrust and competition practice, with offices in Washington and New York City.

Google has said it will continue to license the ITA software to third parties after the acquisition is complete.

Google is buying companies to boost its online services, spending about $1.6 billion on more than 20 companies in the first nine months of last year, according to regulatory filings. ITA follows other large acquisitions by Google, including mobile ad service AdMob Inc. last year for about $700 million and online advertising provider DoubleClick in 2008 for $3.2 billion.

AdMob Deal

“The government was going to challenge AdMob, the government was going to challenge DoubleClick, but ultimately it all ends up going through,” said Heath Terry, an analyst at Canaccord Genuity in New York. He has “buy” ratings Google and Priceline and “hold” ratings on Expedia and Orbitz. “The jury is still out on whether ITA being bought by Google is really a negative for Expedia, Priceline and Orbitz.”

Online travel agencies Priceline.com Inc. and Orbitz have been supportive of the deal, which Google said would allow it to display flight times and prices in search results, much as Microsoft Corp.’s Bing search engine is already doing.

The American Consumer Institute Center for Citizen Research, a Washington-based nonprofit that describes itself on its website as an educational and research group, said in a statement that it is “encouraged” by reports of a possible lawsuit.

“Google’s acquisition of ITA would give it dominant control of online travel search, which would lead to less choice and higher prices for consumers.” Steve Pociask, president of the institute, said in an e-mailed statement.

Prior Plans

The threat of a government lawsuit has thwarted Mountain View, California-based Google’s expansion plans before. The company in 2008 abandoned its agreement to place ads on Yahoo! Inc.’s site after the department threatened to challenge the venture in court.

The National Business Travel Association, which represents more than 13 million business travelers, has urged regulators to carefully review the ITA acquisition out of concern it could result in higher costs to business buyers and endanger access to real-time airfare information.

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