Following a months-long investigation and vociferous opposition, the Federal Trade Commission today approved Google's tide-shifting acquisition of ad management firm DoubleClick. Still, the deal is by no means out of the woods. The European Commission's ongoing investigation of the proposed deal is expected to be more stringent, while intervention by the U.S. Congress and lawsuit threats from privacy guardians loom.
"It's difficult, if not impossible, for global companies to start implementing a global merger before they have both U.S. and E.U. clearance," said Douglas Lahnborg, antitrust partner at Heller Ehrman.
Meanwhile, Google nemesis Microsoft, whose similar aQuantive acquisition glided by regulatory hurdles, is nipping at the heels of the search behemoth. And the FTC intends to keep a watchful eye on the two firms and the Web ad industry as a whole.
In a statement regarding its 4-1 decision not to block the proposed $3.1 billion buy, the commission said the deal is "unlikely to substantially lessen competition," based on a set of antitrust-related measures. Despite critics' adamant contention that the two firms are direct competitors, the FTC ruled Google and DoubleClick do not directly compete "in any relevant antitrust market," according to the Commission's statement.
The FTC also said the merged firms wouldn't have a major impact on competition in the online ad space in the future, even if Google's entry into the ad management sector through DoubleClick ownership proves a success. Commissioners also noted Google's strength in the third-party ad serving market isn't sufficient enough to stifle competition in the sector, and decided the chance for anti-competitive manipulation of Google's third-party ad serving business is unlikely.
Opponents of the acquisition, including Microsoft, privacy advocates and others have taken great pains to show it as a pairing of direct competitors. Lone dissenting Commissioner Pamela Jones Harbour, an independent appointed by President George W. Bush, wrote, "I dissent 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 publishers and advertisers have expressed concern Google could tap into the reams of data flowing through DoubleClick's ad management system to manipulate ad prices. Still, other industry insiders believe the interactive ad industry is teeming with potential for competition in current and yet-to-be-imagined sectors.
"Some of the newer [ad management] solutions have the potential to leapfrog the current generation," said David Smith, CEO of integrated media agency Mediasmith, which employs Microsoft-owned ad management system Atlas, and buys media from Google for advertising clients. "Some of the biggest areas of Web advertising haven't even hit the ground yet... Who's to say that the current big vendors will be the innovators?"
Google's intention to snap up DoubleClick spurred a slew of subsequent acquisitions in the online ad tech space, including Microsoft's acquisition of aQuantive, owner of ad management platform Atlas, a major DoubleClick competitor. Just yesterday Microsoft proved its own online advertising vigor, grabbing Viacom's ad management business from DoubleClick.
"Microsoft seems to be pouring more resources against things on the Atlas wish list," said Smith.
The European Commission could be more sensitive to the anticompetitive potential of the deal for the EU. In November, the European Commission decided to open a phase two investigation of the acquisition, meaning its decision most likely won't be made till early next year.
"Investigations are only put into the second phase if the European Commission has serious doubts about the effects on competition in the EU," said Lahnborg, adding, "Competitors frequently get contacted by the European Commission for comments and input on merger investigations."
The FTC stressed it lacks legal authority to block the acquisition based on privacy issues or other non-antitrust related grounds. But privacy concerns over the merger of one online data gathering colossus with another are bound to factor into the European Commission's analysis.
"What doesn't get addressed here is likely to at least have another examination in the next few months," said Center for Digital Democracy executive director Jeff Chester during a press conference this week regarding the FTC's investigation.
The CDD and the Electronic Privacy Information Center have been among the deal's most vocal critics. The two groups recently called for the recusal of FTC Chairman Deborah Platt Majoras from the commission's review of the acquisition, on grounds that her husband's law firm Jones Day has advised DoubleClick regarding the deal. The chairman did not remove herself from the review. Since then, the organizations have suggested they may file a lawsuit arguing against the decision to maintain Majoras's involvement.
The FTC stated consumer privacy implications of the combined companies relate to the online ad industry as a whole, and are "not unique to Google and DoubleClick." Recognizing the need to safeguard industry competition as well as consumer privacy, the commission today also proposed principles for online behavioral advertising, a common target of privacy advocates and detractors of the Google/DoubleClick deal.
"This merger put Google antitrust and privacy issues on the radar screen in Washington, and they're not going away," said Scott Cleland, president of tech industry research and consulting firm Precursor, and author of a paper damning the deal as monopolistic. He added, "This is just the beginning of Google's antitrust scrutiny."
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Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.
March 19, 2014