ITA: Too good to be acquired?

by on October 27, 2010 · 0 comments

A coalition of online travel sites, including Kayak, Expedia, and Travelocity, has recently formed in opposition to Google’s purchase of travel search services firm ITA, [according to the WSJ]( The group is “launching a lobbying blitz on Capitol Hill, making the case to members of Congress that the deal would allow Google to dominate the online air-travel market by giving it control over the software that powers many of its rivals in the travel search business.” Microsoft also opposes the deal, noting that its Bing search engine relies on ITA information. Alas, I don’t think we’ll ever see an end to corporations trying to use the antitrust laws to protect themselves with no benefit to consumers.

Let’s be clear about what exactly ITA is, which is a search company. Airlines publish their flights, inventory, prices, and fare rules to computer reservation systems like Worldspan, Sabre, and Apollo. What ITA brings to the table is search technology that lets users sift through that information to find the best flights to suit their needs. They have developed industry-leading algorithms that look at the fare rules and pricing and show you what different flights can be combined to offer the best fare. ITA does not sell anything to consumers. Instead, they license their search technology to companies like Kayak and Orbitz. Unbeknownst to consumers, they use the ITA search engine on those sites and book there.

**ITA does not control any necessary input.* There is no barrier to entry for new competing travel search services firms. They just need to get the flight data from airlines or computer reservation systems. In fact, there are several other competing firms. ITA just happens to be the best one. And there is no guarantee that it always will be. A day after Google acquires the company, some small developer in a garage may unveil a competing algorithm that blows ITA out of the water. That is what is so wonderful about the internet. So what incentive will innovators have if they know that if they become *too* successful, their clients will incite the state to prevent them from cashing in on their hard work? What incentive will the Bings of the world ever have to innovate or acquire better travel search technology if they can get the government to guarantee them access to the best?

Congress, don’t fall for it.

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