UPDATE 3-Google seals ITA deal; larger antitrust review looms

* Google plans to launch travel search service

* Google, rivals’ disputes to be settled by arbitration
(Rewrites first sentence, adds comment from analysts,
background, closing share price)

By Diane Bartz

WASHINGTON, April 8 (Reuters) – The Justice Department
approved Google Inc’s (GOOG.O: Quote, Profile, Research) purchase of ITA Software with
stiff conditions on Friday, and left the door open to a larger
probe into whether Google manipulates its search results to
hurt rivals.

The Justice Department blessed the $700 million deal with
the ticketing software company. Google promised to license the
software for five years, to continue to upgrade it, and to
establish firewalls to protect ITA clients’ intellectual
property.

The ITA buy is part of an acquisition and hiring spree as
Google aims to ensure its online services stay on top as
Internet surfers go mobile and turn to services like the wildly
popular Facebook.

Now, U.S. antitrust regulators will turn to the question of
whether to open a formal antitrust probe into allegations that
Google, the world’s No. 1 Internet search engine, manipulates
search results, a source told Reuters on Friday. (For a
BREAKINGVIEWS column, see: [ID:nN08201390] )

The Federal Trade Commission and Justice Department are
both contemplating an investigation but there has been no
decision made on which agency may take it up.

There has been a series of complaints made to the agencies
— many from Google rivals that specialize in searches such as
price comparison websites — that Google has made them
difficult to find.

A key lawmaker has been critical of Google, and remained so
on Friday. “We continue to scrutinize broader questions about
the fairness of Google’s search engine, and whether it
preferences its own products and services to the detriment of
competitors,” said Sen. Herb Kohl, chairman of the Judiciary
Committee’s antitrust subcommittee.

The European Commission took up an antitrust probe after
complaints from three small companies, one of them owned by
Microsoft. (MSFT.O: Quote, Profile, Research) [ID:nLDE71L0JH] Microsoft filed a formal
complaint with the commission in Brussels last month.
[ID:nN31223364]

Microsoft charged that Google hurt competition by “walling
off” content on its YouTube site, so other search engines
cannot display accurate results. It also said that Google made
it hard for Microsoft’s mobile phone software to show videos
from YouTube, among other charges.

The Justice Department was also aware that Google had an
incentive to tweak search results to favor its businesses and
was keeping an eye on the issue, said a Justice Department
official who requested anonymity.

“There were a variety of complaints about bias in search,”
the official said. “So, while we’re aware of those complaints
we did not think they were relevant to this (ITA)
transaction.”

Analysts said they believed that Google’s power in search
meant the company had to step carefully, and that a broader
probe was a big worry.

“A lot of these new markets that they enter rely heavily on
search to drive traffic,” said Yun Kim, an analyst with
Gleacher & Co. “That’s what the government is worried about.”

CONDITIONS PLACED ON GOOGLE BUY OF ITA

Google said in July that it would buy ITA Software for $700
million in cash. The announcement sparked concerns that travel
websites such as Kayak and TripAdvisor could be deprived of
ITA’s software.

ITA’s QPX is used by leading airlines and travel
distributors like Alaska Airlines (ALK.N: Quote, Profile, Research), American Airlines
(AMR.N: Quote, Profile, Research), Microsoft’s (MSFT.O: Quote, Profile, Research) Bing and Hotwire (EXPE.O: Quote, Profile, Research), among
others.

Disputes between Google and the online travel websites —
for example over fees — are to be submitted to arbitration,
the Justice Department said.

Google said it was “excited” to get the deal approved, and
would soon bring out a new travel search tool.

“We’re moving to close this acquisition as soon as
possible, and then we’ll start the important work of bringing
our teams and products together,” wrote Jeff Huber, a Google
senior vice president, in a blog post.

Google shares dipped 0.3 percent to close at $578.16 on
Friday.
(Additional reporting by Alexei Oreskovic and Jeremy Pelofsky;
Editing by Lisa Von Ahn and Matthew Lewis)

UPDATE 3-Google seals ITA deal; larger antitrust review looms