Google faces close DOJ scrutiny on ITA

Despite what the spinmeisters over at Google’s Public Policy Blog would have you believe, the Internet giant is facing tough scrutiny from the U.S. Department of Justice over its planned acquisition of ITA Software.

Googler Andrew Silverman explained in a late Friday afternoon blog post that the DOJ has just asked for more information about the proposed deal. He tries to portray the request as expected and routine. He writes:

“While we think this acquisition will benefit travelers as well as those seeking their business, we know that closer scrutiny has been one consequence of Google’s success, and we said that we wouldn’t be surprised if there were a regulatory review before the deal closes. This week we received what’s called a ‘second request,’ which means that the U.S. Department of Justice is asking for more information so that they can continue to review the deal.”

He concludes by saying, “We’ll be working cooperatively with the Department of Justice as they continue their review.”

Well, under the law, they’ve got no choice about that.

Google makes it sound like just a routine part of the process, right? Well, Second Requests are a bigger deal than Google would have you believe.  Under the Hart-Scott-Rodino Antitrust Improvements Act, merging companies are required to notify Justice and the Federal Trade Commission of their plans and observe a waiting period before closing the deal.  Most of the time no additional information is sought. Or as the DOJ says in a briefing about merger policy:

“Most HSR premerger notifications do not lead to an antitrust investigation. For example, 2,979 of the 3,655 transactions reported during the fiscal years 2002-2005 proceeded without either the FTC or the Division opening an investigation, meaning that 81 percent of the time no information was sought from the parties beyond that which was included in their initial HSR filings…”

“The Division does not issue second requests lightly. During the years 2000-2005, for example, the Division issued second requests in 180 of its 555 preliminary investigations, or 32 percent of its investigations. Approximately 97 percent of HSR reported transactions were able to proceed with no second request.”

Justice Department Antitrust Division Workload statistics show 1,656 pre-merger notifications were filed in 2008 and 70 investigations were initiated.  In 2009 only 713 notifications were filed with 48 investigations opened. Although the statistics don’t say how many, presumably some of the investigations were concluded without Second Requests being issued.

Clearly Second Requests  are relatively unusual.  Google tells you that regulators are interested because the company is successful, implying that critics are jealous of that success.  Actually Justice is interested because some of Google’s practices are anti-competitive and could well violate the law.

There isn’t another company that more deserves a thorough investigation by the Justice Department.

Published by John M. Simpson

John M. Simpson is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

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