Google’s merger with ITA helped it grow into the giant that the Justice Department is scrutinizing

Google critics and rivals have long warned the search engine is threatening countless industries from shopping to travel by consistently pointing people to its own products and services on the biggest search platform on the Web. And those competing against Google to win over consumers say that the search engine forces them to pay their biggest rival in advertising dollars just to show up.

Google’s dominance in search has drawn more regulatory scrutiny and criticism from rivals and lawmakers in recent months, something that is expected to culminate in the Department of Justice filing an antitrust suit against the company in the coming weeks. Lawmakers are also preparing new legislation to rein in tech’s power, following the publication last week of a congressional investigation that found Google engaged in anticompetitive tactics.

The case by the Justice Department would be its biggest swing yet to rein in the power of tech giants in decades, and the stakes couldn’t be higher. But some who warned the government a decade ago say it may be too late.

Google “is a monopoly, without question,” Barry Diller, chairman of Expedia and IAC, said in an interview. Google has been great for consumers, Diller said, but it increasingly restricts competitors by making it more expensive to compete in online advertising. Expedia and IAC sites are pushed down the page in favor of Google’s own services, he said.

“Google is essentially competing with our services while taking our money,” he said. “I don’t want the person I’m spending billions of dollars with to compete directly against me.”

Ten years ago, the government had a chance to block the purchase of a travel software company that now powers Google’s flight searches. Even though the government found it might cut into consumer choice, regulators approved it with just a few conditions.

The travel company, ITA Software, made a powerful engine used by Hotwire, Orbitz and other online companies to search flight options and quickly show fares and schedules. Google, which had a sparse travel presence at the time, scooped it up for $700 million.

Some of Google’s acquisitions over the past decade-and-a-half have triggered federal government reviews, but the company has emerged largely unscathed. Its $2.1 billion purchase of Fitbit, which would give it valuable health data, is under review now.

And over time, its search results page has evolved to include more readily accessible answers — and more of Google’s own products.

“It’s such a gradual process,” said Pete Meyers, an expert on Google Search algorithms who works as a marketing scientist at search engine optimization company Moz. “It’s often subtle in the moment. Six months later, when all of these small changes accumulate, Search can look very different.”

The congressional report specifically called out Google’s tendency to fill out search results with its own content or ads, effectively limiting traffic to the outside while simultaneously allowing it to charge more. The report also said Google gives its own products a boost even when inferior to competitors. Google said in a response that many of the committee’s recommendations would harm consumers.

Google defended its practices by saying its services are free and good for users.

“While we continue to engage with ongoing investigations, our focus is firmly on providing free services that help people every day, lower costs for small businesses, and enable increased choice and competition,” spokeswoman Julie Tarallo McAlister said in a statement.

Tech giants have had largely unfettered growth for years, thanks to the way federal regulators have interpreted U.S. antitrust law. Now, the Justice Department is facing immense pressure to clamp down after past stumbles.

“There have been so many visible expressions of intent to bring a case, to do something, that they cannot retreat from that if they are to retain any vestige of credibility,” said William Kovacic, the former chairman of the Federal Trade Commission, who is now a professor of law at George Washington University.

Federal regulators have also divvied up Amazon, Apple and Facebook for scrutiny. (Amazon CEO Jeff Bezos owns The Washington Post.)

At a congressional hearing in July, the CEOs of all four companies underwent a five-hour grilling where lawmakers accused them of unfairly shutting out competitors and amassing too much personal user data.

“The evidence seems very clear to me: As Google became the gateway to the Internet, it began to abuse its power,” Rep. David N. Cicilline (D-R.I.), chairman of the House Judiciary antitrust subcommittee, said during the hearing. “It used its surveillance over Web traffic to begin to identify competitive threats and crush them.”

The CEOs cited a key defense: that every move they made helped them create useful and free services that were good for consumers.

That argument has become an important one. U.S. antitrust laws were initially written in 1890 in an era where Standard Oil and, soon after, U.S. Steel, dominated their industries. They controlled so many aspects of the market that small companies had no choice but to work with them, driving up prices.

The laws are intended to protect consumers from rising prices by promoting competition. Mergers are generally okay if they are small enough, don’t replicate an existing business area or won’t result in higher prices.

Tech giants have swooped in to acquire businesses that fit these guidelines — like Google and ITA; Facebook and messaging service WhatsApp; and Amazon and grocery chain Whole Foods. But with those acquisitions, they’ve transformed into sprawling businesses with tentacles across the economy.

Over the past few years, some U.S. legal experts and lawmakers have started to call for updates to better fit the new, most powerful companies. One of the clearest cases stemmed from then-law student Lina Khan in 2017, who presented a way to look at how Amazon was controlling competitors at little cost to itself — causing ripples through the industry, all while seemingly benefiting consumers in the near term.

“The current market is not always a good indication of competitive harm,” Khan, who now works with Cicilline, told The Washington Post in 2017. “They have to ask what the future market will look like.”

Some members of Congress have also pointed to the massive amounts of data Google is acquiring when it buys other companies — a valuable resource that feeds into Google’s main moneymaker, its ad business. Privacy experts and lawmakers have asserted that Google’s services aren’t in fact free because people pay with their data.

Amazon and Apple referred to comments its executives made before Congress. Facebook did not comment.

In 2010, Google’s revenue was five times smaller. It competed mainly with Microsoft and Yahoo, with which it had abandoned talks to merge two years earlier after U.S. regulators signaled they would block the deal. It was, however, gaining in advertising power after its DoubleClick acquisition for $3.1 billion in 2008.

Google had only dipped its toe into travel with a flight tracker tool to help people find arrival times. It also operated a simplified flight search service that linked to other online travel sites. But it wanted to add immediate airfare results to its searches.

It proposed a $700 million purchase of travel software maker ITA, small enough to gain regulatory approval. Google said it would “create a new, easier way for users to find better flight information online.”

But a coalition of online travel companies issued a dramatic warning: allowing Google to go through with its plan could ensure it would “manipulate and dominate” the market. That coalition, made up of companies including Expedia and Kayak, said the acquisition could lead to higher prices and fewer options for people planning trips.

ITA played a “crucial part” in online travel, the coalition said, and having one competitor control it could be devastating.

“Combining Google and ITA — the dominant providers of web search and flight search technology, respectively — raises some serious concerns for travelers and the online travel industry as a whole,” Dara Khosrowshahi, then the CEO of Expedia, said in a statement through the coalition in October 2010. “We support this coalition because we believe consumers deserve transparency, and that they — not search engines — should choose winners and losers in online travel.”

After an eight-month investigation, the Justice Department said the deal could lead to “reduced innovation and reduced consumer choice.” But it agreed to a settlement in 2011 requiring Google to keep licensing ITA software to other companies, which it still does. It also set up boundaries for how Google could use customer information it collected from its travel features for five years.

“The biggest fear at the time was that Google was going to introduce a product that would push down the organic flight searches,” said Emil Martinsek, who worked at Expedia property Hotwire during Google’s merger investigation.

Six months later, the Mountain View, Calif., tech giant launched Flights, a service that pops up at the top of search results whenever someone looks for flights — powered by Google.

In recent years, executives from Expedia, which also owns and Orbitz, have pointed to Google’s search results as a sticking point in its growth, even while acknowledging that Google is a vital part of driving people to their sites.

Search traffic weakness stemmed largely from pushing traditional links further down the page and instead pointing people to Google’s hotels or flights modules, then-CEO Mark Okerstrom said on an earnings conference call with investors in November.

Diller, chairman of Expedia and IAC, said he doesn’t have a problem paying Google for advertisements. “That’s an acceptable path, but when Google continues to restrict our advertising in replacement for ads that are more remunerative to Google, that’s a problem.”

Martinsek, who is now chief marketing officer for Berlin-based travel site GetYourGuide, said Google has become “less and less of a neutral ad platform” at the expense of its competitors. GetYourGuide said it has been contacted by anticompetition regulators in Europe after reports earlier this year of the smaller company accusing Google of using its data to make competing products.

Even though the biggest companies say Google has stolen business, some small businesses say they have benefited. For example, Scott Keyes, founder of Scott’s Cheap Flights, combs the search engine for the best flight deals and sends them to subscribers in emails.

“It’s been something we’ve been using since the beginning because it’s such a superior user experience,” Keyes said.

The trickiest part of U.S. antitrust law is predicting at what point something good for consumers could sour, legal experts said.

Kovacic, the former chairman of the FTC, said he might have paused on approving Google’s purchase of DoubleClick, which worked closely with Web publishers and operated an ad-buying business, if he’d known how valuable it would prove for Google as it built its own digital advertising empire.

“I have thought to myself, ‘If you knew what you know now would you have intervened in some way?’ ” Kovacic said. “And I think the answer is, ‘Yes, I would have.’ ”

In addition to launching Flights, Google has increasingly leveraged its search service in different ways to answer queries for consumers while also benefiting its own products. A quick search for Rihanna videos will pop up links to YouTube, another key acquisition. A hunt for directions will turn up Google Maps. And a search for something to eat nearby will pop up Google restaurant reviews.

“We make changes to Search to create a better experience for people,” it says. “We constantly test and refine our systems, using feedback from search raters across the country and the world to measure the quality of our results.”

Review site Yelp sees it differently. The company has accused Google for years of stealing Yelp’s content and using it on Google Search results, depriving Yelp of clicks.

Cicilline raised this issue at the congressional hearing in July, pointing to claims that emerged during his committee’s investigation that the search giant had stolen its restaurant reviews and threatened to “delist” Yelp when it complained. Cicilline also accused Google of monitoring Web traffic to “identify competitive threats.”

“Our documents show that Google evolved from a turnstile to the rest of the Web to a walled garden that increasingly keeps users within its sights,” he said.

Google CEO Sundar Pichai disputed that characterization, and said Google helps small businesses.

Google has faced scrutiny on that issue before. In 2013, the Federal Trade Commission closed its two-year investigation into Google’s search priorities. Google placed its own services, such as Shopping or Local, at the top of the page.

The FTC concluded that “even those that may have had the effect of harming individual competitors — could be plausibly justified as innovations that improved Google’s product and the experience of its users.”

“U. S. antitrust law gives a huge amount of freedom to firms to decide what competitive strategies they want,” said New York University law professor Eleanor Fox.

Now, more than 90 percent of all online searches start at Google, according to Web analytics company Statcounter. That eclipses its closest competitor, Microsoft Bing, which has less than 3 percent of the market.

Once a sea of blue links, Google’s results page now features many of its services as an answer box at the top of the page, often below only paid ads from competitors.

The Department of Justice’s lawsuit is expected to focus on Google’s dominance in search.

“The argument of concern to the government would be the combination of acquisitions and behaviors have allowed them to become more dominant, to create a platform that is so prevalent, so necessary to search and for advertisers to communicate — that they are a true monopolist,” said Bill Baer, a visiting fellow at the Brookings Institution who led the antitrust division of the Justice Department from 2013 to 2016.

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