THE BLOG
04/08/2011 02:27 pm ET Updated Dec 06, 2017

Will ITA Takeover Conditions Move Google Towards Becoming Public Utility?

The Justice Department announced today (following this Wall Street Journal leak) that Google and the Justice Department have agreement to allow the $700 million takeover of flight-data company ITA Software Inc. The condition is reportedly that federal regulators will continue to monitor Google's operations to assure the company doesn't shut out competitors from using ITA's services and establish a compulsory licensing system monitored by the government.

A New Precedent for Accountability: This is a quite dramatic precedent in creating a new vision of Google as a publicly accountable company. As the WSJ writes:

The proposed agreement would for the first time allow government antitrust monitoring of a part of Google's operations to assure that the company doesn't unfairly use its control of ITA's airline data to put rivals at a disadvantage.

The proposed monitoring could set a benchmark for future Google acquisitions. The company, having once conceded that U.S. regulators could oversee its behavior on a continuing basis, would be more likely to face antitrust enforcers' demands to accept such terms again.

A monitoring agreement amounts to a "recognition that Google has become a dominant firm in certain markets, and restrictions of this kind are almost a matter of course for such companies," said Herbert Hovenkamp, an antitrust law professor at the University of Iowa.

"This merger monitoring actually creates an ongoing investigation of sorts," said Rebecca Arbogast, an analyst with Stifel Nicolaus, in the New York Times. "Anything related to search or travel, the government's going to be permitted to get information, which looks very much like an investigation." Arbogast compared the monitoring to early actions in the antitrust case against Microsoft.

Sharing Data with Travel Industry: With ITA's data and technology powering popular Internet airline-ticket search and booking sites,the settlement will require Google to provide ITA's services to competitors under "fair and reasonable terms."

To prevent Google from gaining an unfair advantage through access to consumer data, the DOJ announced:

Google will be required to implement firewall restrictions within the company that prevent unauthorized use of competitively sensitive information and data gathered from ITA's customers. The proposed settlement delineates when and for what purpose that data may be used by Google.

And Google has to share key customer booking data with competitors and is prohibited from "entering into agreements with airlines that would inappropriately restrict the airlines' right to share seat and booking class information with Google's competitors."

Making Enforcement Work: Along with Justice Department monitoring the agreement provides for mandatory arbitration under certain circumstances and "for a formal reporting mechanism for complainants if Google acts in an unfair manner," meaning anyone harmed by Google's actions will be able to get much speedier resolution in many instances than facing off with Google in endless litigation delays.

Forward Looking: Most impressive in some ways is that the settlement is forward-looking, applying to technology that ITA has not even deployed yet:

Google will be required to continue to license ITA's QPX software to airfare websites on commercially reasonable terms. QPX conducts searches for air travel fares, schedules and availability. Google will also be required to continue to fund research and development of that product at least at similar levels to what ITA has invested in recent years. Google will also be required to further develop and offer ITA's next generation InstaSearch product to travel websites, which will provide near instantaneous results to certain types of flexible airfare search queries. InstaSearch is currently not commercially available, but is in development by ITA.

This hopefully means that Google can't as easily divert future internal R&D to an alternative travel search technology not covered by the settlement.

Google as Public Utility: A dominant company monitored by the government that must share its services in an open and regulated manner with the public?

That begins to make Google more like a common-carrier utility, which is just about what the behemoth search engine should be. Depending on how tough the conditions and monitoring actually end up being, the conditions could be a model for how much of the rest of Google's operations should be treated by antitrust authorities.

This is actually a recipe for more innovation in the industry, since it will assure that Google technology is widely accessible. It's worth remembering that it was compulsory licensing of technology imposed on the old Ma Bell in the mid-20th century that led to wide licensing of the microprocessor innovations created by Bell Labs. Silicon Valley was the direct result of not allowing one company exclusive control of key technology.

A Step in the Right Direction: Apparently, though, the deal does little to address concerns that Google will use the new technology acquired to steer users of Google search engine to a travel-search service Google plans to build around the ITA technology. The problem of Google using dominance of search to build subsidiary businesses at the expense of competitors may require use of additional tools by regulators and policymakers.

And this of course only applies to one slice of online commerce and search, but by giving practical experience in monitoring one sector, it will provide insight and a model for how to extend accountability across the whole Internet commercial search environment.

As with any agreement, god is in the details and ultimately in how tough government followup and enforcement ends up being. But at least the Justice Department took public concerns over Google's monopolistic behavior seriously enough not to giver the merger a free pass and articulated some decent principles of technology and data sharing.