Google-ITA Software gets green light. American-Expedia deal leaves GDS question open
The USD700 million deal for Google to acquire ITA software, having been approved by the US Department of Justice with conditions last Friday, will likely face further investigations. It is clear from reactions to the qualified approval the issue is far from over and has done little to actually assuage the concerns from rivals as well as both US and European authorities. As it is, DOJ will be monitoring Google's compliance with the conditions placed on the deal to protect rivals' access to ITA Software and to prevent bias towards Google's own products.
The key question left unresolved is whether or not Google uses its power as the world's largest search engine to manipulate the marketplace. DOJ apparently did not think it relevant to the actual deal. But that doesn't mean much.
Indeed, it is entirely possible that such an investigation may yet be opened. Authority rests with both DOJ and the Federal Trade Commission, but there is no news of if, when and which agency will launch it. The European investigation is already under way at the behest of three small companies, one owned by Microsoft, who suggest that Google's dynamics make them harder to find.
Opponents, including Microsoft and FairSearch.org representing big online ticket agencies, praised the DOJ ruling saying the conditions imposed are designed to protect consumers. Without those conditions, according to DOJ, competition would be diluted as would innovation and consumer choice. Google said when it announced the deal it did not want to launch its own travel site, although, according to the Wall Street Journal, there is nothing in the ruling to prevent that. Google's initial statements are little solace in the face of its silence on what it ultimately intends to do with ITA, although it has said it is important to the company for ITA to continue on with business as usual. Amadeus, not a member of FairSearch, suggested that the deal will result in more interest in its products.
The real test may come from the European Union as it revamps its code of conduct for such technology if lobbying groups get their way. Opponents charge the Google/ITA deal transforms the marketplace, according to the European Travel Technology and Services Association, and the DOJ ruling falls short of what is needed because it is limited to fare comparison rather than the distribution marketplace.
Indeed, Expedia said the ruling ignored the key bias issue as well as the possibility that results could be manipulated in favour of advertisers or Google travel products. In addition to the European investigation, the Texas attorney general has one in play. Even so, opponents also question the enforcement of any codes of conduct developed.
The concessions to gain DOJ approval were designed to ensure robust competition. Google has to continue through 2016 the contracts for ITA's air fare search and it must continue developing ITA's new software - InstaSearch - offering it to travel websites. It must protect customer information by erecting firewalls. Finally, it must also continue to fund research and development at the same levels ITA has done, according to the Department of Justice.
American, Expedia deal leaves GDS question open
Meanwhile, after more than a week, there is absolutely no guidance as to what the deal between American and Expedia really means. The consensus from those who follow this controversy is that it seems to be a win for American, but the airline is not talking.
While American regains display on Expedia and Expedia will do its business through Direct Connect, the question about achieving the holy grail for American remains hidden. American's quest is for GDSs to pay the airline to list its content and no one is talking. Even so, it seems the plates are shifting, even if all we are left with is speculation.
It seems Expedia blinked as the chorus for change became louder and its financials reflected the loss of American. Other airlines have voiced support for American's goals.
All this is good news for the airlines since it is a step toward wresting control of their own content. This lack of control over content or inability to data mine the bookings is unique to the travel industry and costs the industry about USD20 billion annually.
American and Sabre are currently negotiating, having put the litigation on hold until June, but the rift with Orbitz is in full sway as is the public relations campaign against the airlines. Sabre thinks it has solved the issue by offering ancillaries at no incremental cost to the airline, but that is not what the airlines want so much as being paid for their content and the end to the commoditisation of their product. Meanwhile Orbitz continues to receive more for each American booking. The higher fees are good until American returns to the fold.
To date, there is no real resolution to the issue and more questions than answers, but the plates are shifting.