Google's ITA acquisition compares to Microsoft-Intuit '95?January 20, 2011: 3:15 PM ET
To one professional Google watcher, the Google ITA deal draws lots of parallels to the attempt by Microsoft to buy personal finance software company Intuit in 1995. And it should be dealt with the same way: blocked.
Scott Cleland writes in his Precursor blog some interesting parallels between Google (GOOG) and Microsoft (MSFT) and their attempts to enter and dominate new markets by acquisition.
Microsoft in 1995 attempted to buy Intuit which makes the popular Quicken and Quickbooks line of software for managing personal finances. Cleland gives three parallels:
First, in over thirty years, Microsoft is the only major company other than Google to establish a national monopoly via technology, generate broad serious antitrust complaints, and attract a Sherman Act anti-monopolization case from the DOJ.
Second, Google-ITA is very similar to Microsoft-Intuit as both attempted to leverage their horizontal industry dominance vertically into a non-tech market vertical of the economy, i.e. Microsoft into personal finance software and Google into travel search software.
Third, DOJ sued Microsoft in 1998 in large part for anti-competitively bundling its Explorer Internet browser with its dominant Windows Operating system in order to disadvantage Netscape and other competitive browsers.
Is Google heading down the same road? Cleland thinks so and that the DOJ should block the ITA acquisition.
There are a few meaningful points that Cleland leaves out. The most significant is that Microsoft owned the #2 personal finance software, Microsoft Money at the time, so it was effectively buying its competitor in an effort to sew up the market.
Google currently has no travel software in its portfolio so it would be a new entrant into the market.
At the time, Microsoft offered to sell its finance software, Money, to Novell Corporation. But just selling the product didn't help the case. The Justice Department argued that, "If consummated, the proposed transaction...would likely add to the dominance of the number one product (Quicken), would weaken greatly the number two product (Money), and would substantially increase concentration and reduce competition in the personal finance/chequebook software market."
At the time, Microsoft was also working on an online component which its competitors couldn't match. This could be seen as a parallel to Google. Google owns peripheral search services that would give it an advantage in the travel market. That has to be scary for competing companies like Kayak, Orbitz and Expedia that currently get a lot of their traffic and customers from Google.
My biggest concern, however, is that ITA is portrayed as a 'Golden Goose' with technology that can't be replicated. A company called the Airline Tariff Publishing Company, publishes the latest airfares for more than 500 airlines multiple times per day. This data is easy to come by. ITA isn't the only software that can use this data to provide ticket results.
Certainly there is leverage to create similar software between the companies that are fighting the ITA acquisition. Orbitz, which started as an alliance of six major US Airlines also saw a lot of anti-competition criticism when it was created.
Orbitz was the airline industry's response to the rise of online travel agencies such as Expedia and Travelocity, as well as a solution to the continued increase in Global Distribution System (GDS) fees. Continental Airlines, Delta Air Lines, Northwest Airlines, and United Airlines, subsequently joined by American Airlines, invested a combined $145 million to start the project in November 1999.
Saying ITA is the be all and end all of airline booking software seems beyond weak.
Finally, a lot of this Google monopoly momentum is being created by competitors. This Wired story from 2009 details the lengths to which Microsoft and telecoms like AT&T have been spending lobbying money to sway DOJ officials. Those efforts brought Google to within hours of being sued by the DOJ over their attempted search alliance with Yahoo.
It strikes me as a little bit hypocritical that AT&T and Microsoft, of all companies (two recent DOJ monopoly abusers) are so adamant about getting the DOJ involved with Google's acquisitions. This passage perhaps explains why they are so involved:
Microsoft's protracted antitrust battles had left it with an army of lawyers and lobbyists and deep institutional knowledge of which politicians to approach and how best to sway them.
So, back to Cleland's arguments. Should the DOJ block ITA? That's hard to say. The damage may already have been done however.
Google should certainly take note that if they continue to push the envelope by purchasing companies, entering new markets and making enemies with connections in Washington, they could wind up going down the same road as Microsoft.
But the DOJ pressure is already making things more difficult.
There were some whispers that the Groupon deal fell apart because Google wouldn't guarantee against government intervention the way it did with the Admob deal. If the Admob deal didn't pass through the DOJ, there was a clause in the contract that Google would owe Admob a majority of the purchase price as the company remained private.
I don't know that a similar agreement is in place with ITA, but Google may no longer be able to afford the insurance against government intervention when purchasing larger companies going forward.
But that might be good for everyone.
Updated: Jan 23rd at 2:00pm to reflect that no airlines are involved with Fairsearch.org