February 20, 2011 in Business

Google’s travel deal faces regulatory turbulence

 

SAN FRANCISCO — Google wants to become the hub of online travel, promising better bargains and more convenience by melding the Internet search leader’s wizardry with the Web’s top airline-fare tracker, ITA Software.

That has existing online travel sites such as Kayak, Expedia and Travelocity worried that they won’t stand a chance of competing, a scenario that could lead to higher fares.

The U.S. Justice Department is expected to decide soon on whether to let Google Inc. buy ITA for $700 million. The deal would give Google control over software that has helped power the reservation systems of most major U.S. airlines and a fleet of online fare-comparison services for the past decade.

The government review could serve as a test of how aggressively U.S. antitrust regulators intend to police Google as the company uses the wealth and influence gained from its dominance in Internet search to expand into other lucrative markets. The U.S. market for online travel bookings totals about $80 billion annually, according to Forrester Research.

Google says owning ITA, the brainchild of computer scientists specializing in artificial intelligence at the Massachusetts Institute of Technology, would lead to lower prices and more convenient ways to shop for tickets on the Internet. For instance, travelers might tell Google how much they could afford to spend to visit a warm place on certain dates, and the search engine would turn into a travel guide.

But critics contend that Google would be able to hobble other travel services by burying them in its search results or denying them ITA’s latest technical innovations. Google so far has only promised to honor all of ITA’s current contracts, which expire over the next few years.

“Google will have leverage over the entire online flight industry,” said Thomas Barnett, a former leader of the Justice Department’s antitrust division. Now an attorney in private practice, Barnett represents Expedia Inc., which has banded with such online travel services as Microsoft Corp.’s Bing, Travelocity, Kayak Software Corp. and Farelogix Inc. to oppose the ITA deal.

Google has promised it won’t sell airline tickets or book other travel arrangements on its own site. Rather, Google would refer people elsewhere to buy tickets and make reservations for hotels and rental cars. Those sites would earn commissions.


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