Reports on negotiations between the U.S. Department of Justice and Google on its proposed $700 million acquisition of ITA Software may call into question some of Google's pledges to ITA's customers.
Various reports suggest that the DOJ is pushing for a consent decree mandating that Google pass along to ITA Software's clients the upgrades to its QPX airfare shopping and pricing system.
Short of such an agreement, it's possible that DOJ would sue to kill the deal.
But, the Wall Street Journal reported that Google is resisting such an agreement.
"Google has argued that it shouldn't be forced to pass on its most valuable innovations with ITA to other companies," according to the Wall Street Journal. "Such a requirement, it argues, could eliminate any incentive to improve the product in ways that would help consumers."
In other words, why innovate if competitors to a new Google travel service would share in the inroads?
Since July 1, 2010, when Google revealed it intended to acquire ITA Software, Google has insisted that ITA Software clients have nothing to fear and that Google would honor existing licensing contracts with ITA Software's customers, who range from Bing Travel and Kayak to TripAdvisor and Continental Airlines.
And, in a debate on CNN, a Google spokesman said the company is committed to continuing to make QPX software available to ITA Software customers and plans to renew and enter into new agreements.
In fact, an ITA Software spokeswoman said following the TV broadcast that the company has been renewing contracts with customers and any allegation that the company is declining to do so "is just pure nonsense."
Meanwhile, Kayak maintains that both Google and ITA Software failed to give Kayak assurances that its license would be extended at "fair and reasonable terms" and that existing and future licenses would be upgraded with the best available technology.
So, if the reports about the DOJ negotiatons are true that Google does not want to commit to transferring innovations to ITA Software's clients, then this gives competitors' fears more weight and suggests that Google has a different agenda.
ITA Software clients who oppose the deal also have argued that if Google had no intention of freezing them out of innovations to ITA Software's solutions, then Google could have licensed QPX like everyone else does instead of acquiring the company.
And, Google countered that argument, saying licensing QPX wasn't on the agenda because Google would reap greater benefits from tightly integrating ITA Software's solutions.
That tighter integration would also seem to signify a have-and-have-not dichotomy between the would-be owner of ITA Software -- namely Google -- and customers, who might not receive the premium innovations.
Deal opponents fear that Google could possibly provide them with upgrades to "QPX," but then create derivative products which might be called something else and remain solely within the kingdom.
From Google's standpoint, why would it want to pay $700 million to buy ITA Software if Google weren't free to reap competitive advantage from innovating in tandem with an in-house ITA Software?
Wouldn't such prohibitions call the whole deal into question?
These are some very tough issues for antitrust regulators, Google and deal opponents to work out.
These issues are the prime reason that FairSearch, at least publicly, says a consent decree would be insufficient and that it would only be satisfied if the DOJ sues to gut the deal.