The Federal Trade Commission is not expected to conduct an investigation of the search ad deal between Yahoo and Google. With the Department of Justice officially inspecting the agreement to ensure it passes antitrust muster, the FTC should stay away in any official context.
“The DOJ is looking at the proposed transaction,” said a Justice Department spokesperson, noting the inspection involves questions of competition. The deal is already subject to congressional scrutiny.
According to people familiar with how the FTC and DOJ typically operate, there would never be two independent investigations into the same merger or collaboration. Mainly, it wouldn’t be a good use of resources.
However, that doesn’t mean the FTC won’t assist the DOJ in some capacity. For instance, the FTC may share information based on its prior work. The commission investigated Google’s acquisition of ad management firm DoubleClick for months before finally approving it late last year.
The DOJ most likely got involved because Yahoo and Google notified the department of its ad deal plans. However, one antitrust lawyer who asked to remain anonymous suggested the Justice Department may have pushed to run the investigation rather than bow to an FTC investigation.
“It may have been an internal fight,” suggested the legal source. “I imagine the DOJ wants its foot in that space, too,” he added, in reference to the online advertising industry. In addition to its investigation of Google’s DoubleClick purchase, the FTC has taken a strong interest in the behavioral targeting sector as it relates to consumer privacy and data security.
Under the non-exclusive agreement between Yahoo and Google, Yahoo will place ads purchased by Google advertisers on search results pages of its choosing, and may carry Google ads on non-search pages.
When the unlikely partners expanded an initial two-week trial of the deal last month, Google stated the companies voluntarily agreed to delay implementation of that arrangement to give the DOJ time to conduct a review. The June 12 statement specifically said the firms would wait “for up to three and a half months” for the department to come to a conclusion about the arrangement.
DOJ investigations have been known to take months and even years to finalize. However, the Justice Department, which typically has a prosecutorial bent, has been known to take less time to come to a conclusion than the FTC, which tends to be more methodical and bureaucratic in its approach.
“I’m sure there is a lot of pressure the parties are putting to bear on the DOJ to move forward quickly,” said the legal source, who believes the investigation most likely “will take many months.”
If the FTC were to have taken on the investigation, the potential outcomes probably would be primarily the same. There are differences between the way in which each agency handles such an investigation; yet, a major difference is the FTC has no authority to charge civil penalties or file criminal action on its own.
A document issued in 2000 by both the FTC and the DOJ, and intended to guide “business people” involved in deals that could raise antitrust concerns, offers a glimpse into what the DOJ might consider in its deliberation. According to the “Antitrust Guidelines for Collaborations Among Competitors,” the investigation may assess the type of collaboration Google and Yahoo will undergo, and whether it increases their ability or incentives to raise costs, lower output, reduce quality or stifle innovation.
Part of the DOJ’s analysis may involve evaluating whether the sharing of data between Google and Yahoo to determine which firm serves up which ads where could facilitate collusion. According to the document, “in some cases, the sharing of information related to a market in which the collaboration operates or in which the participants are actual or potential competitors may increase the likelihood of collusion on matters such as price, output, or other competitively sensitive variables.”
Some search marketers worry that the Google/Yahoo deal could result in higher prices for search ads.
However, the guidelines go on to state something which could influence the DOJ’s decision: “the sharing of individual company data is more likely to raise concern than the sharing of aggregated data that does not permit recipients to identify individual firm data.”
There are a couple ways the investigation is likely to play out. The DOJ could threaten to sue to block the transaction if it is deemed anti-competitive. In that case, the firms might alter the original agreement to ensure it doesn’t force higher prices or hinder viable competitive options for search advertisers.
If the companies don’t alter the agreement or if changes made don’t satisfy the DOJ, the agency could seek to convince a federal court to block the partnership. “It’s a game of chicken,” said one source.
Another possible result: The deal could get the all-clear.