Google seals ITA deal; larger antitrust review looms

WASHINGTON Fri Apr 8, 2011 5:12pm EDT

Surfboards lean against a wall at the Google office in Santa Monica, California, October 11, 2010. REUTERS/Lucy Nicholson

Surfboards lean against a wall at the Google office in Santa Monica, California, October 11, 2010.

Credit: Reuters/Lucy Nicholson

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WASHINGTON (Reuters) - The Justice Department approved Google Inc's purchase of ITA Software with stiff conditions on Friday, and left the door open to a larger probe into whether Google manipulates its search results to hurt rivals.

The Justice Department blessed the $700 million deal with the ticketing software company. Google promised to license the software for five years, to continue to upgrade it, and to establish firewalls to protect ITA clients' intellectual property.

The ITA buy is part of an acquisition and hiring spree as Google aims to ensure its online services stay on top as Internet surfers go mobile and turn to services like the wildly popular Facebook.

Now, U.S. antitrust regulators will turn to the question of whether to open a formal antitrust probe into allegations that Google, the world's No. 1 Internet search engine, manipulates search results, a source told Reuters on Friday.

The Federal Trade Commission and Justice Department are both contemplating an investigation but there has been no decision made on which agency may take it up.

There has been a series of complaints made to the agencies -- many from Google rivals that specialize in searches such as price comparison websites -- that Google has made them difficult to find.

A key lawmaker has been critical of Google, and remained so on Friday. "We continue to scrutinize broader questions about the fairness of Google's search engine, and whether it preferences its own products and services to the detriment of competitors," said Sen. Herb Kohl, chairman of the Judiciary Committee's antitrust subcommittee.

The European Commission took up an antitrust probe after complaints from three small companies, one of them owned by Microsoft.

Microsoft charged that Google hurt competition by "walling off" content on its YouTube site, so other search engines cannot display accurate results. It also said that Google made it hard for Microsoft's mobile phone software to show videos from YouTube, among other charges.

The Justice Department was also aware that Google had an incentive to tweak search results to favor its businesses and was keeping an eye on the issue, said a Justice Department official who requested anonymity.

"There were a variety of complaints about bias in search," the official said. "So, while we're aware of those complaints we did not think they were relevant to this (ITA) transaction."

Analysts said they believed that Google's power in search meant the company had to step carefully, and that a broader probe was a big worry.

"A lot of these new markets that they enter rely heavily on search to drive traffic," said Yun Kim, an analyst with Gleacher & Co. "That's what the government is worried about."

CONDITIONS PLACED ON GOOGLE BUY OF ITA

Google said in July that it would buy ITA Software for $700 million in cash. The announcement sparked concerns that travel websites such as Kayak and TripAdvisor could be deprived of ITA's software.

ITA's QPX is used by leading airlines and travel distributors like Alaska Airlines, American Airlines, Microsoft's Bing and Hotwire, among others.

Disputes between Google and the online travel websites -- for example over fees -- are to be submitted to arbitration, the Justice Department said.

Google said it was "excited" to get the deal approved, and would soon bring out a new travel search tool.

"We're moving to close this acquisition as soon as possible, and then we'll start the important work of bringing our teams and products together," wrote Jeff Huber, a Google senior vice president, in a blog post.

Google shares dipped 0.3 percent to close at $578.16 on Friday.

(Additional reporting by Alexei Oreskovic and Jeremy Pelofsky; Editing by Lisa Von Ahn and Matthew Lewis)

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