Ethics @ Work: Google’s slippery slope

Acquisition of ITA may be problematic.

google logo 311 (photo credit: Courtesy)
google logo 311
(photo credit: Courtesy)
Google was founded just over a decade ago with the goal to “organize the world’s information and make it universally accessible and useful.” Its main product is a search engine, which is the gate through which approximately two-thirds of all the world’s searches pass, with the other third being divided up among various competitors including Yahoo and Bing.
One of its other projects is the Google Books initiative to digitize a large fraction of the world’s books to make them searchable and available.
Early this month Google took another step to make the world’s information more accessible and useful: It acquired the ITA corporation, which collects and provides information on airline flights. ITA does not sell airline tickets, nor is it a travel agent that matches buyers with ticket sellers. It isn’t even a service to help travelers search for flights. It is strategically located at the source of information: It obtains the flight information from airlines and makes it available to existing commercial-travel search services.
If you visit one of these sites and type in your place of departure, destination and travel dates, ITA’s software provides you with information about available flights.
So far it sounds simple: Google exists to make information accessible and useful; ITA has a unique tool to make one particular kind of information accessible and useful; Google acquires ITA; Google will now be able to make flight information available through an ordinary Web search.
However, competitors and regulators are worried that this could be unfair and anticompetitive.
What are the possible problems? One issue is the trust people place in the Google search. Google allows people to pay to have their searches prominently displayed, but these “paid results” are clearly marked so that the user can distinguish them from “impartial” searches by Google’s search engine.
One of the reasons Google’s service is so popular is that people trust it to provide what they want to see and not what Google would like them to see. That trust is easy to maintain when Google is just a search provider. But when it is a content provider, it might not be easy to convince users that Google isn’t subtly tweaking its search engine to direct them to Google’s businesses.
An additional problem is fair conduct toward its customers. The vast majority of Google’s revenue comes from advertisements, and a fair chunk of this revenue comes from companies that might now be competitors.
Barry Diller, chairman of the travel service Expedia, told the Financial Times his company gives “very many hundreds of millions of dollars” to Google each year for advertising and expressed concern that Google is giving prominence to its own services.
Airlines also pay Google a fortune in advertising, and they could be wary of having Google simultaneously being a supplier and a competitor. Advertising is not an arm’s-length business, and Google obtains information about these businesses from its relationship with the advertising firms.
The regulators are worried about “vertical integration.” Vertical integration means that a company merges with a supplier (or customer).
Today’s flight search could start with Google to find a search service and go from there to an online travel agent or airline. Google will certainly merge the first two and will have the option of doing all three.
Vertical integration can be a pro-competitive step, giving customers better service and better prices through efficiencies of integration. But it can also be anticompetitive; it can leverage market power (the ability to dictate prices) in one market to obtain market power in another market.
Some of the problems could be solved by creating a fire wall between the regular search service and the travel search service. Google’s search would have an arm’s-length relationship with the flight search. But that doesn’t seem very practical. It violates the business logic that dictated the deal in the first place: making information more accessible and useful by enabling you to find a flight directly from a text search.
There is also the problem of trust. Google’s algorithm is secret, to keep people from gaming it. It might not be easy for them to convince customers that they aren’t tweaking it to their advantage, as Diller fears.
Google’s efforts to reassure customers might be complicated by its recent conduct in Europe. It turns out that the Street View vehicles Google used to photograph building facades also collected information about private wireless networks – without disclosing this fact. So the public trust in its pronouncements is not necessarily at an all-time high.
Mergers can be pro-competitive, taking advantage of integration to provide better service and lower prices, or anticompetitive, leveraging the increased concentration to obtain monopoly power and an unfair advantage over competitors. Google has its work cut out for it in its latest acquisition: to create both the reality and the image of a merger whose only goal is to provide better service to the traveler. Asher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).