If you ask the average Internet user what Google is, most people would answer: a search engine. But that’s not all that Google has become in the past ten years. Many of us have at least heard of their bigger-ticket acquisitions, such as Picasa in 2004, Android in 2005, YouTube in 2006, and DoubleClick in 2007. But it hasn’t been until more recently that questions about Google entering into disparate markets have really emerged in the forefront of the public conscious– a sign of the changing times is the fact that the Federal Trade Commission only narrowly approved Google’s acquisition of AdMob earlier this year, finding that closing the deal likely wouldn’t adversely impact the mobile ad networking market. But as Google tests the water in emerging markets, it’s finding that its past successes are haunting its future conquests.
Google and ITA merger: for better or worse?
On the heels of AdMob was Google’s merger with ITA Software in July of this year. ITA Software is the innovator of the QPX technology, travel search giants such as Kayak, Orbitz, and Expedia all utilize integrated QPX platforms in their air travel search and pricing services. ITA’s dominance in GDS, or global distribution systems, which serve to link ticket bookers such as airline passengers and travel agencies to the booking systems of travel suppliers such as airlines, will prove to be a valuable asset as Google decides how it will use the software to develop and implement its own flight search tools, which is exactly what has travel search giants and not-so-giants alike up in arms.
While some industry analysts are applauding Google’s entrée into the market, anticipating that it will stimulate the otherwise stagnating field of travel search technology, many more are skeptical, and increasingly alarmed, about the impending deterioration in competition and the threat it poses to other GDS’s. Robert Birge, chief marketing officer of Kayak, commented: “There are legitimate concerns…about what that deal could mean to competition in the market and how it could affect consumer choice.” He echoes the sentiments of a growing number of travel site competitors and consumers, and it seems that the U.S. Department of Justice is picking up on the concerns.
The DOJ steps in
Google is alleged to be in violation of the Sherman and Clayton Acts, which make many monopolies or attempts to monopolize a market illegal. The essential premise of the allegations is that Google is attempting to monopolize varying related markets- by acquiring ITA’s specialized technology, it has the potential to use its dominance in web search to become dominant in travel search.
Google announced in late August that they had received a “second request” for information from the DOJ as part of the regulatory review of the acquisition.
The DOJ’s process of review for deals such as the acquisition in question consists of a preliminary “waiting period” review, lasting approximately a month. During this time the DOJ can ask for voluntary divulgence of information and hold discussions with the companies. At the conclusion of this phase, the DOJ decides whether to give the deal the green light or look into it further during a “second request” stage.
Violating vertical boundaries
So what’s the big deal? Should we be concerned that Google is leveraging its cutting edge engineering capabilities to enter different but related markets? That might depend on how you define separate markets. If you contemplate that video-sharing technology, digitized book-scanning and indexing, and travel data aggregation to be related enough to online search, then Google is arguably just doing variations on a theme of its specialty. But, if you’re beginning to think that Google is getting into a lot of things it doesn’t normally do, you might think it is merging with complements; that is, it’s not buying up competitors so much as it’s absorbing entities further upstream or downstream in the supply chain.
Whereas Google currently scans and indexes travel search information that it acquires from Kayak or Orbitz and display it as a one-box result, with the new ITA software Google can feasibly create its own travel data aggregation platform and be able to offer the same services as Kayak or Orbitz but as a Google product. This can be a troubling prospect to say, a small travel search site which sees this deal as Google invading and dominating their niche industry. But proponents of Google, and certain lines of antitrust theories, contend that Google shouldn’t be punished for its well-earned successes—if not for its technological savvy leading to the creation of such services as Google Books, we may not have the many sophisticated products Google offers (mostly free of charge) and continues to create.
What does this mean for consumers?
The purpose of antitrust law is not to impede competitive efficiency, which typically benefits consumers by producing better products and lower prices. Having previously worked in-house at a technology company, I observe a certain cognitive dissonance: when a company does too well or becomes dominant in its field, we are quick to suspect that bad intentions and certain misconduct are the culprits for such success. But in my personal experience, it’s common, if not the norm, that companies which fare well do so because they are giving users better choices, higher quality, and lower prices. It’s difficult for a private company to convince consumers that it has their welfare and best interests in mind—but that is exactly how a company gains respect and earns loyalty from discriminating customers. Why is it exactly that we use Gmail, Chrome, and Scholar? Because they’re useful and easy to use. If Google can develop a better way to aggregate and disseminate travel data, that would be useful, too. So why should we stop them?