Google Said to Be Possible Target of U.S. FTC Antitrust Probe

Google Inc. (GOOG)’s dominance of the Internet-search industry is being considered for a broad antitrust investigation by the U.S. Federal Trade Commission, two people familiar with the matter said.

Before proceeding with any probe, the FTC is awaiting a decision by the Justice Department on whether it will challenge Google’s planned acquisition of ITA Software Inc. as a threat to competition in the travel-information search business, said the people, who spoke on condition of anonymity because the matter is still confidential.

An FTC investigation of Google, the world’s most popular search engine, “could be on par” with the scope of the Justice Department’s probe of Microsoft Corp. (MSFT) a decade ago, said Keith Hylton, an antitrust law professor at Boston University School of Law. Google “could fight the FTC, but that’s going to cost a lot of money and time.”

The FTC and Justice Department share responsibility for oversight of antitrust enforcement, and the outcome of the ITA deal may determine whether the two agencies will vie for control of a broader probe of Google, the people said. The two agencies sometimes negotiate which will handle major antitrust investigations, with the decision turning on their respective expertise.

The Justice Department may soon announce its decision on Google’s purchase of ITA, said the people familiar with the matter.
Commissioner’s Support

FTC Commissioner Thomas Rosch said in an interview last month he supported a probe of the dominant players in the Internet-search industry, without specifying which companies. Rosch, one of two Republicans on the five-member commission, is the only commissioner to say publicly that such an investigation is in order.

The people familiar with the matter said any investigation of the search industry should concentrate on Mountain View, California-based Google, owner of the world’s most popular search engine.

If consumers don’t like what the company is doing, they can switch to another search engine, said Adam Kovacevich, a Google spokesman.

“Since competition is one click away on the Internet, we work hard to put our users’ interests first and give them the best, most relevant answers to their queries,” he said in an e- mail. “We built Google for users, not websites.”

Cecelia Prewett, a spokeswoman at the FTC, and Gina Talamona, a Justice Department spokeswoman, declined to comment.

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Google's Eric Schmidt Passes CEO Reins to Larry Page

Google Inc. co-founder Larry Page will become chief executive officer, taking the reins from Eric Schmidt, who oversaw the transformation of a barely profitable startup with 200 employees into the owner of the world’s most- used search engine, with $29 billion in sales last year.

“Larry is ready,” Schmidt, who will become executive chairman, said today on a conference call. “It’s time for him to have a shot at running this.”

Schmidt, 55, who joined the company in 2001, will focus on deals, partnerships and customers, he wrote in a blog post. Page takes over day-to-day operations on April 4. Schmidt navigated the company past early doubts that it could build a successful ad business around a search engine. He also oversaw the 2004 initial public offering, the biggest for an Internet company.

“We view this as evidence of the founders staying fully engaged in the business -- a positive,” said Mark Mahaney, an analyst at Citigroup Inc. in San Francisco.

The company also posted fourth-quarter profit that topped analysts’ estimates as businesses boosted spending for online advertising.

Google, based in Mountain View, California, rose 1.3 percent in late trading to $635, after closing at $626.77 on the Nasdaq Stock Market. The shares fell 4.2 percent last year.

Page’s Challenges

Page, who has never been the CEO of a public company, takes the helm of Google and its 24,000 employees as it confronts accelerating rivalry from Facebook Inc., the world’s largest networking site, which has amassed more than half a billion users since its founding in 2004. Google also faces competition in mobile advertising from Apple Inc.

The change transfers leadership from a scholarly manager who holds a Ph.D. in computer science and worked for more than a decade as a technology executive before joining Google -- to an entrepreneur almost two decades his junior who began working as a university undergraduate on the project that spawned Google.

Schmidt acted as a mentor to Page during his tenure. He also clashed with the co-founder, Ken Auletta, author of “Googled: The End of the World as We Know It,” told Bloomberg Television. The company brought in Intuit CEO Bill Campbell to act as “a coach and to almost be like a shrink,” Auletta said.

“They went through a very tough management patch,” Auletta said.

While Google faced down threats from rivals Yahoo! Inc. and Microsoft Corp. under Schmidt, the competition facing Page will be fiercer, said Whit Andrews, an analyst at Gartner Inc.

Facebook Foe

“Google versus Facebook is an order of magnitude more challenging,” said Andrews, based in Shrewsbury, Massachusetts. Competing with the social network for the attention of Web audiences will require new technology that differs from search, he said.

Google co-founder Sergey Brin, 37, will focus on strategic projects, especially new products, the company said.

Page and Brin met at Stanford University in 1995 and the following year began to collaborate on a search engine. The fruit of that effort was incorporated in 1998, beginning in a Menlo Park, California, garage. Page and Brin brought in Schmidt to become chairman in 2001. He was named CEO later that year.

In the fourth quarter, Google benefited from its main search-engine business as advertisers stepped up efforts to reach consumers through the Web. Spending on search-based ads rose 23 percent in the U.S. during the quarter, with gains in retail and travel, according to Efficient Frontier, which manages more than $1 billion annually in online advertising.

Ad-Spending Boost

Net income rose 29 percent to $2.54 billion, or $7.81 a share, from $1.97 billion, or $6.13, a year earlier, the company said in a statement. Profit excluding some items was $8.75 a share, exceeding the $8.08 average of estimates compiled by Bloomberg. Sales, excluding revenue passed on to partner sites, were $6.37 billion, topping the $6.06 billion average estimate.

“As e-commerce growth has accelerated in the fourth quarter, so has advertising spending,” said Richard Fetyko, an analyst at Merriman Curhan Ford & Co. in New York, who recommends buying the stock and doesn’t own it. “When consumers shop more, companies are more aggressive with advertising.”

The company is focusing more attention on mobile devices with its Android operating system, an area where it competes with Apple for the sale of smartphones and tablets. Schmidt was on Apple’s board until 2009, when he resigned because of overlap between the companies’ businesses.

Android Growth

Android topped Apple’s iPhone in U.S. smartphone subscribers for the first time in November, accounting for 26 percent of the market, compared with 25 percent for Apple, according to ComScore Inc. BlackBerry maker Research In Motion Ltd. had the top spot with 33.5 percent.

While Google doesn’t charge for Android, it’s helping the company expand mobile-ad sales. Google was projected to grab 59 percent of the U.S. mobile-ad market last year, according to research firm IDC. The company benefitted from its 2010 purchase of AdMob, which had 8.4 percent of the market in 2009.

Google is maintaining its leadership in the search-engine business even as it faces a stronger challenge from rivals Yahoo and Microsoft. In August, Yahoo began using Microsoft’s Bing technology to provide online search results.

Google grabbed 66.6 percent of searches in the U.S. in December, up from 66.2 percent in the previous month. Combined, Microsoft and Yahoo had 28 percent, down from 28.2 percent, according to ComScore.

‘Adult Supervision’

Schmidt may be weighing a role in the administration of U.S. President Barack Obama,Auletta said in the TV interview.

Before joining Google, Schmidt served as chairman and CEO of computer-networking software maker Novell Inc. He had previously worked at computer and software maker Sun Microsystems Inc., where he helped develop the Java Internet- programming language. Schmidt, who has degrees from Princeton University and the University of California at Berkeley, also worked at Xerox Corp. and AT&T Inc.’s Bell Labs.

Schmidt commented on the management change to his more than 225,000 followers on Twitter: “Day-to-day adult supervision no longer needed!”

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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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