U.S. regulators should keep in mind the average consumer when proceeding with a decision on the prospective Google acquisition of online air-travel booking software giant ITA. ITA services many of the most popular online travel booking sites, and while the Department of Justice is trying to work out language that would guarantee freedom of use even after the acquisition, an impenetrable agreement is highly unlikely. The deal could quickly advantage Google in direct competition with online travel firms like KAYAK, Expedia and Orbitz, Hotwire and others.
Last week, a strong dose of consumer protection made major headlines as the American Antitrust Institute (AAI) asked legislators, regulators, and business influentials to take a step back and understand the full ramifications of the Google / ITA merger before making their decisions).
AAI makes the case that, while it’s easy to see any vertical acquisition from Google as a threat to antitrust, the ITA acquisition is especially worrisome:
“A dominant Google in online travel search would also have uniquely important effects on consumer choice. Consumer choice in online travel search not only facilitates improved online travel search offerings, but it is an important guarantor of access to information, a check on airfare and search advertising prices, and a facilitator of airline discounting practices.”
It’s important to understand that consumers benefit from free markets and intense market competition. However, when one company buys up the competition or the major suppliers of its competitors, the result is not necessary a competitive outcome and is unlikely to maximize consumer benefits, as a free market should. While we’ve suspended judgment on the decision, consumers would be wise to ask themselves if this move is freeing to them, not just to Google.
The authors of the AAI report start to anticipate just those sorts of questions as they stress the importance of marketplace diversity:
“To the extent that consumers enjoy wide choice in online travel search, they are more likely to discover all available airfares and routes that would accommodate their needs. And it is this wide access to online travel search offerings that forces airlines to compete for the business of consumers and search providers to compete for the business of advertisers.”
“[Google] arguably controls demand for online travel search products. Meaningful control of both supply and demand for online travel search would seem to pose a dangerous risk of monopolization.”
In the world of tech companies, understanding the effects of major transitions like the one proposed by Google is a science still in its infancy. While much of the digital economy is still defining itself, we can operate with some knowns.
First, Google is the de facto gateway to information on the internet. Google owns more than two-thirds share and more by some measures.
Second, ITA is the leading innovator for the increasingly prosperous online travel booking sector. Even the most optimistic tech punditry suggests that guaranteeing access to future ITA innovation for competitors’ use is nearly impossible.
Lastly, Google has shown little regard for consumers. Google has led the charge and the rhetorical battle in support of what would be an economically-crushing net neutrality policy. More alarming still, the company has been caught in a number of ugly scandals.
Google’s systematic unauthorized collection of personal information from wireless networks has Consumer Watchdog up in arms. “Once again, Google has demonstrated a lack of concern for privacy,” said the group, “Its computer engineers run amok, push the envelope and gather whatever data they can until their fingers are caught in the cookie jar.” Add to the list of scandals an enthusiasm for partnering with a number of government agencies, along with the Obama administrations too-close-for-comfort ties and it’s clear: Google doesn’t necessarily always have the consumers’ best interest in mind.
So, when the company announced plans to acquire ITA for $700 million, the world’s leading software provider for online travel agencies (such as CheapTickets, TripAdvisor, Orbitz, Hotwire, KAYAK and SideStep) and some airlines (such as United, Continental, Southwest, Virgin and US Airways), there’s definitely cause for concern.