Feds seek to use ITA deal to rein in Google.(Business)

Byline: Jia Lynn Yang; The Washington Post

WASHINGTON -- The Justice Department is poised to make a decision that could fundamentally alter Google's relationship with the federal government.

Antitrust officials are pushing Google to accept limits on its behavior in exchange for government approval of the search giant's purchase of travel-software firm ITA, according to people familiar with the matter.

Such an agreement would require ongoing monitoring by antitrust officials -- a first for Google -- just as scrutiny of the firm heats up from regulators in the United States and Europe.

Google could walk away from the deal or fight the government in court. A Justice Department decision could come within a week or so, but some sources cautioned that negotiations could drag out longer.

No matter what, Google faces new regulatory realities after 13 years of operating largely free from government intervention. Last week, the Federal Trade Commission (FTC) announced a major settlement with Google requiring regular audits of the company after complaints that Google violated privacy agreements with users when it launched its Buzz social-networking product.

How Google handles negotiations over the $700 million ITA merger is a test for new Chief Executive Larry Page, who took over Monday. He follows Eric Schmidt, a politically savvy executive who worked at Sun Microsystems while it battled Microsoft during the software giant's seminal antitrust case.

"One of the reasons Google has played hardball so much is clearly they don't like the idea of government oversight," said a senior official familiar with the company who spoke on the condition of anonymity in order to speak freely.

So far, the company has not faced an official investigation from the two U.S. agencies charged with preserving fair competition, the Justice Department and the FTC.

Google has also seen the government approve its two major acquisitions of Internet advertising firms: DoubleClick in 2008 and AdMob in 2010. The company walked away from a merger with Yahoo in 2008 when it became clear Justice was willing to go to court to block the deal.

But with every deal Google proposes, officials have been getting a better look at the company's inner workings. Attaching strings to the ITA deal could wedge the door open even wider for antitrust officials, allowing them to study the company for a longer period and perhaps gather evidence for a broader case.

The European Union has already launched an investigation and has fielded complaints from companies, including Microsoft, that Google is leveraging its dominant search engine to block competitors.

Google has long argued that its search competitors are "one click away" and that consumers stick with Google because it offers better products.

Critics say Justice should block the ITA deal because the company owns the technology that powers the majority of online flight searches. Orbitz, Microsoft's Bing and Kayak all rely on ITA.

At the very least, the companies have argued, antitrust officials should require Google to continuing licensing ITA's product, especially since Google has ambitions of launching its own travel search engine. These companies also worry that Google will rank its travel product higher in its main search results.

Google has said it simply wants access to the company's software in order to build the best possible travel search engine. The company has said it will not cut competitors off from ITA's technology.

The Justice Department and Google declined to comment.

"I think people are beginning to really worry about Google and where it's going," said Bert Foer, president of the American Antitrust Institute, which released a paper in February saying the government should seriously consider challenging the deal.

"It's phenomenally complicated and growing so rapidly and moving from area to area and getting into travel," Foer said. "The ITA thing has the potential of bringing them into a whole new industry."

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