Google received an early holiday present from federal regulators Thursday, as the Federal Trade Commission granted a wish the search giant has had on its list since April — approval to complete its purchase of interactive advertising agency DoubleClick.
The Federal Trade Commission authorized the deal after its investigation found that Google’s US$3.1 billion purchase of DoubleClick would be “unlikely to substantially lessen competition,” as some rivals, including Microsoft, had argued. The decision disappointed many privacy advocates, who had urged the FTC to consider the data-tracking implications of the merger.
The deal cannot be consummated yet, however, as European Union regulators have yet to conclude their own investigation. Google has said it is hopeful it can close the merger by early 2008.
‘A Clear Message’
Still, the approval represents a significant victory for Google, especially since it came without any conditions.
“The markets within the online advertising space continue to quickly evolve, and predicting their future course is not a simple task,” the FTC says in its ruling. “Accounting for the dynamic nature of an industry requires solid grounding in facts and the careful application of tested antitrust analysis. Because the evidence did not support the theories of potential competitive harm, there was no basis on which to seek to impose conditions on this merger.
“We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the commission intends to act quickly,” the FTC adds.
The approval underscores what the search company has argued all along: that the merger will not decrease competition in the online ad space.
“The FTC’s strong support sends a clear message: This acquisition poses no risk to competition and will benefit consumers,” Schmidt said. “We hope that the European Commission will soon reach the same conclusion.”
Google shares got a modest bounce from the news in morning trading Thursday, rising almost 1 percent to $683.40.
The FTC approved the ruling by a vote of 4 to 1, with Commissioner Pamela Jones Harbour voting against the deal. “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,” she said.
Another commissioner, Jon Leibowitz, issued a statement of his own, referencing “the substantial privacy issues” the merger brought to light. Despite calls from consumer groups to look at the privacy ramifications of the deal, the FTC did not directly consider those issues in its review, instead relying on rules laid out for it to follow regarding the competitive implications of mergers.
“For us, privacy does not begin or end with our purchase of DoubleClick,” Schmidt said. “We have been protecting our users’ privacy since our inception, and will continue to innovate in how we safeguard their information and maintain their trust.”
Google’s deal created significant regulatory drama, spending more than six months under review, while other acquisitions — Yahoo’s buy of Right Media and Microsoft’s $6 billion takeover of aQuantive — won prompt approvals.
Lack of Creativity?
Google may not be out of the woods just yet. The European Commission has signaled it is engaged in an intensive review of the deal and, earlier this week, a group of privacy advocates said they would consider a lawsuit if FTC Chairwoman Deborah Platt Majoras did not recuse herself from the DoubleClick vote. Those groups said Majoras has a conflict because her husband works at a law firm representing the ad agency.
“Despite the FTC’s claims, privacy is most certainly an antitrust issue,” Center for Digital Democracy Executive Director Jeff Chester said. “A key component of the online market dominance that companies such as Google have achieved is the aggregation and analysis of consumer profiles, including the merger of far-flung data sets and vast data warehouses that only a handful of companies now have at their disposal.”
The FTC essentially “sanctioned the creation of a new digital data colossus,” he added. “The FTC is supposed to protect the privacy of Americans in the digital age. The excuse offered by the majority of the commission — that consumer privacy can’t be addressed by current antitrust law — reveals a lack of leadership and determination to protect U.S. consumers.”
The fact that the FTC could not — or would not — consider the privacy implications of the merger leaves many unanswered questions regarding the vulnerability of consumers’ private data, Sterling Market Intelligence Founding Principal Greg Sterling told the E-Commerce Times.
“Privacy was not a legally relevant consideration in the antitrust analysis,” he said. “And it’s clear that privacy is something that is much broader than this deal and hopefully it will continue to be the subject of ongoing discussion and potential action.”
If nothing else, the FTC may be guilty of “not being creative” in its review, Joseph Turow, the Robert Lewis Shayon Professor of Communication at the University of Pennsylvania, told the E-Commerce Times. Though it’s true that the landscape is still evolving in a way that makes predictions dicey, the agency failed to make the connection between power over information about Americans and how that fits with advertising market dominance, he argued.
“What the FTC should have done is encourage Google to go out and make its own DoubleClick,” he added. “Why hand DoubleClick to Google? It’s a gift that didn’t have to be made.”