FTC’s Xmas Gift To Google: Approval Of DoubleClick Acquisition

The US Federal Trade Commission has granted its approval for Google to
purchase DoubleClick. Google has a
press
release up with the news (and see also here), and the FTC announcement is
here.

The many parties have raised
privacy issues with the
deal, and the FTC noted this was not germane to its approval:

Although interested parties have raised concerns about the proposed
acquisition’s impact on consumer privacy, the Commission observed that such
issues are “not unique to Google and DoubleClick,” and “extend to the entire
online advertising marketplace.” The Commissioners further wrote that “as the
sole purpose of federal antitrust review of mergers and acquisitions is to
identify and remedy transactions that harm competition,” the FTC lacks the
legal authority to block the transaction on grounds, or require conditions to
this transaction, that do not relate to antitrust.

The FTC statement also says that it evaluated three areas in terms of
competition. In summary:

1. The merger would not eliminate direct competition between the companies.
    
2. The merger would not eliminate competition from others in the ad serving
   space. (Indeed, some
   CNET have noted how Google seized on the
   Microsoft-Viacom ad
   and content deal announced yesterday as evidence of healthy online ad
   competition, implying that its acquisition of DoubleClick should be approved.
   In the article Microsoft reiterates its arguments against the acquisition)
    
3. The merger would not allow Google to push AdSense to dominance over other
   ad programs.

The FTC noted that future changes could trigger a new review, however:

The markets within the online advertising space continue to quickly evolve,
and predicting their future course is not a simple task. 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 vote passed 4-1, with commissioner Pamela Jones going against. Among her
points
(PDF):

• Google stopped work on a product that would have competed with
  DoubleClick’s serving platform.
   
• DoubleClick’s marketplace product might have grown to rival AdSense.
   
• Google’s site targeting feature might have developed into a DoubleClick
  rival.

She also gives a big call out to John Battelle’s book, The Search, and his
concept of search engines having a "database of intentions," wondering if the
merger will let Google be too strong here:

In many ways, the acquisition of DoubleClick by Google is a case of first
impression for the Commission. The transaction will combine not only the two
firms’ products and services, but also their vast troves of data about
consumer behavior on the Internet. Thus, the transaction reflects an interplay
between traditional competition and consumer protection issues. The Commission
is uniquely situated to evaluate the implications of this kind of data merger,
from a competition as well as a consumer protection perspective. The
Commission should maximize its opportunity to do so, especially where the
merged firm will be capable of dominating the “Database of Intentions.”

Well, Google already dominates that — so as I’ve
written many times
before, concerns that DoubleClick raised about Google could already be acted
upon regardless of the merger.

She also raises issue of whether the combination of search and display will
help add to a "network effect" that will benefit Google — though Microsoft and
Yahoo both have the ability (and are actively pursuing this) as well.

In conclusion, she writes:

I am convinced that the combination of Google and DoubleClick has the
potential to profoundly alter the 21 century Internet-based economy – in ways
we can imagine, and in ways we cannot.

I do not doubt that this merger has the potential to create some
efficiencies, especially from the perspective of advertisers and publishers.
But it has greater potential to harm competition, and it also threatens
privacy. By closing its investigation without imposing any conditions or other
safeguards, the Commission is asking consumers to bear too much of the risk of
both types of harm. The unique confluence of competition and consumer
protection issues should have been a call to action for this agency – “the
only federal agency with both consumer protection and competition jurisdiction
in broad sectors of the economy.” Section 5 of the FTC Act is the 30
cornerstone of the Commission’s authority to review a wide range of business
practices. The agency embraces its dual, but complementary, missions. While the FTC’s
competition and consumer protection missions focus on different types of
conduct, they share the same overall goal: that consumers obtain truthful
information about products and services that they can then use to make
purchase decisions in a competitive marketplace in which their personal
information is safeguarded. This purpose has assumed even greater importance
in this dynamic, digital, and global marketplace.

With this mission statement as our guidepost, the Commission could have
utilized the full scope of its statutory powers to ensure competition was not
harmed, while also addressing the privacy issues.

Well, Google itself, as well as its rivals, have already been reshaping
things regardless of the merger. Again, if the FTC has concerns, this merger
wasn’t necessary to look further at them. But it may be the catalyst for more to
come.

Google’s press release notes that now it needs the European Union’s approval
to move forward. The EU
has
until April 2 to make a decision.

Discussion is starting
on Techmeme.