The U.S. Justice Department is preparing a court challenge to the Google-ITA Software deal, although a decision on whether to proceed probably won't come until later this month or early February, the Wall Street Journal reports.
Google reportedly notified DOJ that it had complied with all review requests and they agreed that DOJ would have 30 days to make a decision.
The developments, while not necessarily meaning the deal is dead, could be interpreted as a shocking turnaround for an aquisition which several months ago was considered a slam dunk by many.
However, there are reasons to be cautious about the reports of DOJ preparing a court case to block the deal.
When the Federal Trade Commission was reviewing Google's then-proposed acquisition of AdMob, there were reports that the FTC had formed a team to prepare potential litigation.
The FTC ultimately approved Google's AdMob acquisition without conditions.
Responding to the developments about the DOJ preparing a possible court challenge to the ITA deal, Google stated: "While we continue to cooperate with the Justice Department’s review, we are ultimately confident that this acquisition will increase competition."
FairSearch.org, the Expedia, Microsoft, Kayak and Sabre coalition which has spearheaded opposition to the deal on antitrust grounds, also quickly reacted to the development.
“We respect that the Department of Justice is working hard to conduct a thorough investigation," said Tom Barnett, Expedia counsel. "We remain very engaged in the process, and in our view Google’s proposed acquisition of ITA presents a serious threat of harm to competition and consumers. Combining Google’s online search dominance with ITA’s flight search dominance would position Google to undermine competition across the online travel search industry.”
Deal opponents argued that combining the leading search engine with the leading technology provider of airfare data to airline websites, metasearch engines, online travel agencies and corporate booking tools would stifle competition.
Google countered that some of the largest OTAs -- including Expedia.com, Priceline and Travelocity -- don't use ITA's QPX airfare shopping and pricing product so online travel players would have plenty of vendors besides ITA to choose from.
Google argues that acquiring ITA would lead to innovation and enhance the travel search process for consumers and that the search engine giant has no intention of selling airline tickets.
While the Justice Department has reportedly not decided to go to court to block the deal, a number of scenarios could take place short of legal action, including negotiations to place conditions on the acquisition or a decision by Google to walk away from the agreement.
Of course, the DOJ may go ahead and approve the $700 million proposed acquisition, with or without conditions.
Google announced its intent to buy ITA Software July 1 and there has been increasing pressure on the Justice Department on a variety of fronts to rein in the search giant's power as it expands into various verticals, including travel and mortgages.
When the deal was announced, Google offered up its version of the online travel ecosystem.
But the proposed deal also has altered the online travel ecosystem in some unintended ways.
Rivals and sometime partners Expedia, Microsoft, Sabre, Kayak and others have allied themselves to fight the common foe -- a Google-ITA mash-up.
Carroll Rheem, PhoCusWright's research director, doesn't believe the deal is necessarily dead, but remains a question mark.
The reports, if true, would be a "setback," Rheem said.
"I think ultimately Google is on a mission to change the search experience and pricing and fares are part of that," Rheem said. "And there are multiple alternatives for them to obtain that information."
And, for the opponents of the deal, what would be the impact on them?
"I don't think there would be much time for them to celebrate," Rheem said."If Google doesn't get there through ITA Software, they will find another way to do it."
Rheem thinks ITA Software would survive and thrive if DOJ goes to court and the deal ultimately gets blocked.
"I think they [ITA Software] would chug right along," Rheem said, adding that there is still robust demand for ITA's products and the company has good relations with most of its partners. "ITA would come out of that situation just fine."