FTC Approves Google/DoubleClick Merger

The Federal Trade Commission approved Google's acquisition of DoubleClick today, bringing to a close its seven-month review of the $3.1 billion merger that had drawn strident protests from industry competitors and privacy advocates. By a 4-1 vote, the commissioners blessed the merger of two of the heavyweights in online advertising with an unconditional approval, concluding that the combined company is "unlikely to substantially lessen competition." The approving commissioners also stated that the privacy issues raised by merging the two companies' immense repositories of consumer data are "not unique to Google and DoubleClick"; moreover, they determined that questions not directly related to antitrust issues are beyond the legal scope of an FTC merger review. Still, consumer privacy remains a serious concern in the development of online advertising, the commissioners said. As a companion piece to the majority statement, today they also proposed a set of principles for privacy and behavioral marketing. Pamela Jones Harbour, the lone dissenting commissioner, wrote in her statement that an unconditional approval of the merger would fail to adequately address both the anticompetitive and privacy concerns. With the FTC's approval, the European Commission is the only hurdle the merger has left to clear. Many analysts are warning that Google could face a tougher fight in Europe. The EC will hold a meeting on Jan. 21 in Brussels where regulatory officials, industry representatives and consumer groups will address the anticompetitive and privacy issues raised by the merger. The BEUC, one of Europe's leading consumer groups, sent a letter to the EC this week warning that the combined company would harm Europeans' privacy and potentially drive up prices for advertisers. Google is the runaway industry leader in serving up ads targeted to search results; DoubleClick operates as an ad exchange, linking advertisers with publishers looking to monetize their sites by placing banners and other types of ads on available inventory. Google announced the acquisitionin April. The approving commissioners argued that there is already substantial competition in online ad intermediation, citing recent purchases that other industry strongmen have made, such as Microsoft's acquisition of AdECN and aQuantive, and Yahoo's purchase of the Right Media Exchange and BlueLithium. The Commission also concluded that Google and DoubleClick, as independent companies, "are not competitors in any relevant antitrust market." "The FTC's strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers," Google Chairman and CEO Eric Schmidt said in a statement. Dissenting Commissioner Harbour said that she reads the market differently. Describing the likely impact of the combined company as "transformative," Harbour said that without the merger, Google would have become a competing third-party ad-serving networks with its beta "Google for Advertisers" and "Google for Publishers" products. Likewise, DoubleClick was poised to move beyond display ads and become a major player in ad intermediation, Harbour wrote, expressing the general view that online advertising is consolidating, and that search and display can no longer be seen as distinct markets. Harbour's assessment is a marked contrast to the majority's insistence that the rapidly evolving industry is still fragmented, and that DoubleClick did not have a dominant market position. It remains unclear what impact Harbour's strongly worded dissent will have on the EC review of the merger. Jeff Chester, executive director of the Center for Digital Democracy (CDD), which has been one of the most vocal opponents of the merger, chastised the FTC for failing to adequately protect the interests of U.S. consumers. "The Federal Trade Commission 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 very move throughout the digital landscape," Chester wrote in an e-mailed statement. Chester believes that the privacy and antitrust issues are related, because merging the databases of the two companies would aggregate more consumer information than any potential competitor could hope to match. While he praised Harbour's dissent, Chester had harsh words for the other four commissioners. "The majority is living under the illusion that there is legitimate competition in online advertising," he told InternetNews.com. The CDD and the Electronic Privacy Information Center (EPIC) last week called for FTC Chairman Deborah Platt Majoras to recuse herself from the Google/DoubleClick review over a potential conflict of interest. Majoras rejected their complaint, and voted in the affirmative for the merger. EPIC executive director Marc Rotenberg is still mulling strategies to mount a legal challenge to the FTC's vote. That the FTC approved the merger without adopting any of their recommended conditions came as a supreme disappointment for Chester and other privacy advocates. The CDD had proposed that the FTC place a five-year moratorium on the aggregation of the two companies' data sets, for instance. Chester also feels that the FTC shirked its responsibility by painting privacy as a general concern for all online advertising, with nothing uniquely troubling about the Google/DoubleClick deal. "Google brainwashsed the majority of the Commission that privacy is an industry-wide issue not relating specifically to the merger, when in fact it's both," he said. The FTC's privacy statement calls on companies to consider its proposal for self-regulatory principles to address the concerns of transparency and consumer control of data collection, security and limited data retention, proactive opt-in policies and other issues. The FTC is accepting comments on its proposals from consumer groups and enterprise through Feb. 22, 2008. Meanwhile, other groups have lost no time weighing in. The Center for Democracy and Technology released a statement calling on Google to make a public address on how it intends to protect consumer privacy going forward. The group said that the FTC's new proposals indicate that the current state of self-regulation in online advertising fails to adequately protect consumer privacy. In contrast, the Computer and Communications Industry Association (CCIA) applauded the FTC for its unconditional approval. %26#147;It is important that dynamic and innovative Internet companies not be artificially constrained as they experiment with new technology, products and business strategies," CCIA President and CEO Ed Black said in a statement. "Privacy remains an important issue, but these concerns will benefit from separate, industry-wide consideration. As the FTC's statement observes, privacy issues 'extend to the entire online advertising marketplace.' It would do a disservice to consumer interests to shoehorn privacy questions into competition analyses regarding individual companies."