August 28, 2010 12:37 am

Google faces probe over bid for ITA

Google faces the first in-depth antitrust investigation into a core aspect of its search service, following the announcement on Friday that US regulators have opened an extended inquiry into its planned acquisition of ITA Software, the online travel service.

The search group has already been through protracted inquiries into two large advertising acquisitions, most recently its purchase this year of mobile advertising service Admob.

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By contrast, the Department of Justice review disclosed on Friday will deal with an instance of Google’s efforts to build new, specialised services, such as travel information, directly into its search results pages.

That approach, known inside the company as Universal Search, has caused alarm at some companies that rely on traffic from Google, and fear they will be displaced if the company provides information to users directly on its results pages rather than sending them on to other websites.

Barry Diller, chairman of online travel site Expedia, last month attacked the planned ITA deal as “a frontal assault on a core area of internet life”, and called on regulators either to block or impose tough conditions on the merger. In a blog post on Friday, Google said it had received a “second request” for information about the ITA acquisition from the regulators, signalling the start of an in-depth inquiry.

“While this means we won’t be closing the deal right away, we’re confident that the DoJ will conclude that online travel will remain competitive after this acquisition closes,” the company’s blog post said.

The Federal Trade Commission had competed with the DoJ to see which agency would take on the case, according to one person familiar with the process. A DoJ investigation has been seen in some circles as potentially setting a higher hurdle for Google to clear, since the FTC cleared its earlier acquisitions of Admob and DoubleClick.

However, David Balto, an antitrust expert not connected to the case, said that the prospects for the deal were unlikely to have been affected by the choice of regulator, and predicted that the acquisition would ultimately be cleared.

The inquiry comes after Joaquín Almunia, European competition commissioner, said that Brussels was looking closely at turning its own informal review of Google’s search service into a full-blown investigation. Google’s opponents in the US have been agitating for a similar broad-ranging inquiry there into the company, though for now the DoJ has shown no sign that it will launch such a case.

While welcoming the ITA review, Gary Reback, a Silicon Valley lawyer who has helped to organise opposition to the search company, said: “I hope it’s not a substitute for a full … case.”

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