Google's DoubleClick purchase faces scrutiny in Europe
With United States antitrust clearance for its DoubleClick purchase, Google's focus now turns to European regulators, who are expected to be more critical of the top search engine linking up with a market leader in online advertising.
The proposed $3.1 billion transaction, which is strongly opposed by privacy advocates, cannot be completed without approval from the European Commission, whose review deadline is April 2.
The Federal Trade Commission said that the deal would not significantly lessen competition in the online advertising market, rebuffing complaints from Microsoft Corp. and AT&T Inc. that it would give Google a dominant position.
"The FTC's strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers," Eric Schmidt, Google Inc.'s chief executive, said. "We hope that the European Commission will soon reach the same conclusion."
The European Commission declined to comment on the FTC's decision, spokesman Jonathan Todd said.
The FTC's approval of the deal without conditions could push European regulators to take a tougher line, says Rebecca Arbogast, an analyst at Stifel Nicolaus.
For example, they could restrict the ability of the two companies to share the market data they collect or require the combined company to sell off certain assets, analysts have said.
But Arbogast believes Europe will ultimately approve the deal, noting that Google could benefit from the fact that Microsoft has had significant antitrust problems in the EU.
"With enemies like Microsoft, you don't need friends when you're in Europe," Arbogast said.
In addition to selling text ads on its own Web site, Google acts as an intermediary, selling ads through its AdSense network to thousands of online publishers, from small Web sites such as AsktheBuilder.com to large media companies like the New York Times Co.
DoubleClick Inc., meanwhile, helps publishers place and track display ads. Oppenheimer & Co. says DoubleClick, with 40 per cent market share, is the leader in display advertising technology and services.
Microsoft and other critics argue the deal would enable Google to dominate two aspects of the Internet advertising market -- ad sales and ad-serving tools.
The FTC said in a report on its investigation that both the online ad sales and ad-serving markets have numerous competitors, several of which have been bolstered by recent acquisitions.
Those include Microsoft's $6 billion purchase of DoubleClick rival aQuantive, the acquisition of online advertising provider Tacoda by Time Warner Inc.'s AOL, and Yahoo Inc.'s purchase of Internet advertising exchange Right Media Inc. for $680 million.
Other competitors include ValueClick Inc. and 24/7 Real Media, which was purchased by London-based advertising giant WPP Group PLC for $649 million in May, the FTC said.
Privacy advocates say the combined company will have access to a huge amount of data on individual Web-surfing habits. The FTC said it lacked the legal authority to block the deal on any grounds except on antitrust matters.
However, in an apparent nod to these concerns, the FTC on Thursday proposed a set of privacy guidelines for the online advertising industry, describing them as something that "clearly transcend" the Google-DoubleClick deal. It remains to be seen how such guidelines would be enforced.
Privacy advocates were not assuaged.
The FTC "sidestepped its responsibility today when it approved the merger of two companies whose new, extended data-collection reach will give it unprecedented access to track our every move throughout the digital landscape," Jeffrey Chester, executive director of the Center for Digital Democracy, said. The CDD and the Electronic Privacy Information Center fought the deal on privacy grounds.
The five-member commission voted 4-1 in favor of the deal. Commissioner Pamela Jones Harbour dissented "because I make alternate predictions about where this market is heading, and the transformative role the combined Google/DoubleClick will play if the proposed acquisition is consummated."
Online ad spending is projected to reach $21.4 billion this year, according to research group eMarketer, surpassing the $20.5 billion radio advertising market for the first time. EMarketer expects online ad spending to nearly double to $42 billion in 2011.
Shares of Google added $12.32, or 1.8 percent, to close at $689.69 Thursday. (AP)
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