Calling Google's ITA Bluff

The DOJ should call Google's bluff that it would fight the DOJ in court if the DOJ tries to block Google-ITA,  because Google will fold precisely because Google has so much to lose from going to war with the U.S. Justice Department over a $700m deal.

• If DOJ decides to sue to block Google's acquisition of ITA Software, expect Google to walk away from the deal to maintain the status quo and to choose to not make their antitrust predicament massively worse by their own behavior.

While Google blusters they have a strong case in court on Google-ITA, the last thing Google should want is for all their political and PR antitrust defenses to be subject to vivisection, sandblasting, and ridicule in public court for everyone to see.

• Google appreciates that their politically slick PR slogans -- that "competition is a click away," Google only works for users, and Google is innovation-incarnate -- are fatally flawed in court when subjected to legal facts that Google cannot spin or refute.
• Google also appreciates if they go to court over ITA software, they ensure a DOJ hardline on the pending Google Book Settlement, and greatly increase the odds of DOJ eventually filing a Sherman Section 1 & 2 monopolization case against Google.
• In addition, Google knows it is free to compete and innovate on its own in the travel vertical without ITA and that Google can license and benefit from ITA's software/data like every other competitor can.
  • Insisting that Google must own ITA to benefit from it -- which is contrary to the facts -- focuses everyone on the obvious conclusion here: that Google wants to own ITA's software, IP, and data precisely so that it can exclude competitors from it.

The blue whale in the room that few will talk about is Google's not-so-subtle political efforts to wrap itself around the White House in hopes of bringing indirect or direct political pressure on the Justice Department from the White House to not prosecute Google for any antitrust violations.

• Google, in trying to publicly orchestrate a political fix to what should be a law enforcement decision, is putting the White House is a no-win situation.
• Antitrust laws are criminal statutes.
• There are few things more politically radioactive than a company seeking to publicly ingratiate itself at the highest levels in hopes  of getting special political treatment in a law enforcement matter, because it sullies the integrity of both the law enforcement and governing processes.

There appear to be five scenarios of how Google-ITA could be resolved and four are bad for Google long term, and one is good -- so I expect Google to choose the one good option for Google.

1. Google secures political fix: Google is successful in getting political pressure on DOJ to approve Google-ITA like the FTC approved Google-Admob despite "serious antitrust concerns."
   • This short term win for Google would prompt much closer media attention to the propriety of Google's Washington influence long term.
   • It also likely would contribute to making the EU:
     • The default locus of antitrust power in the world; and
     • More likely to come down hard on Google -- because of the perceived U.S. antitrust enforcement vacuum.
2. Google negotiates favorable settlement: Google negotiates a settlement with weak unenforceable conditions.
   • (The American Antitrust Institute's recent analysis showed how Google-ITA is largely "un-regulatable" via conditions.)
   • This scenario is bad for Google long term for the same reasons as #1.
3. Google submits to search regulation: Given Google's recent signals that 'Settlements 'R' Us," Google submits to a long-term DOJ Consent decree that essentially regulates Google's search engine for travel.
   • This is bad for Google because it essentially deputizes DOJ to be an in-house investigator of outside antitrust complaints similar to the DOJ's concerns about Google-ITA.
   • If Google had nothing to hide this might be a good option, but given how fiercely Google avoids legal discovery, most believe Google has an enormous amount of damning evidence that it would like to keep hidden.
4. Google fights DOJ in court.
   • Very bad for Google because it increases the odds considerably of a bad outcome with the Google Book Settlement and the DOJ suing Google in a monopolization case under Sherman Section 1 & 2.
5. Google drops ITA and walks away.
   • This is by far the best outcome for Google.
   • It avoids escalating antitrust tensions with DOJ and the EU.
   • It avoids inviting the DOJ into Google's inner sanctum to become the de facto search travel police.
   • It also prevents a proctological court discovery process and the potential for a very bad legal precedent Google would have to live with.

In sum, I believe the DOJ will enforce the law and not be swayed by Google's inappropriate political pressure for special treatment.

• I believe, like the Google-Yahoo deal, the DOJ will insist either on blocking the deal or on very strenuous deal conditions that would ensure the DOJ could intervene to address and rectify anti-competitive behavior in the future. (However, conditions such as these Google would be loathe to agree to.)

Hence, I conclude that when Google confronts a resolute, prepared-to-litigate, politically-un-manipulable DOJ, Google will blink, fold, and walk away.