European Commission Stalls Google/DoubleClick Deal

The European Commission has decided to open up an in-depth phase two investigation of Google’s proposed $3.1 billion acquisition of DoubleClick, potentially setting the deal back months.

According to a statement released by the European Commission today, a phase one investigation indicated the purchase would raise competition concerns in the markets for intermediation and ad-serving in online advertising.

The Commission now has until April 2, 2008, a period of 90 working days, to reach a final decision on whether or not the acquisition would significantly impede effective competition within Europe. The decision implies the European Commission was unsatisfied with the remedies offered up by Google, which, in response to competition concerns, vowed to keep some DoubleClick business practices unchanged. The decision does not, however, prejudge the final result of the investigation, according to the Commission.

In a statement e-mailed to ClickZ News, Google Chairman and CEO Eric Schmidt said, “We are obviously disappointed by the European Commission’s decision to extend its review of our acquisition of DoubleClick. We will continue to work with the Commission to demonstrate how our proposed acquisition will benefit publishers, advertisers and consumers. We seek to avoid further delays that might put us at a disadvantage in competing fully against Microsoft, Yahoo, AOL and others whose acquisitions in the highly competitive online advertising market have already been approved.”

The U.S. Federal Trade Commission also is reviewing the deal, but the European Commission’s final decision on the merger won’t necessarily have any bearing on whether the FTC approves the merger.

“The question here is whether or not the European Commission will have the stamina to continue the investigation if the deal receives approval from the FTC,” stated Douglas Lahnborg an antitrust partner at Heller Ehrman. “The FTC works very closely with the Commission, and this second phase investigation may or may not influence their decision.”

Lahnborg also pointed out the Commission’s focus on DoubleClick as a potential, rather than actual competitor to Google. “This type of situation is more complex, and more difficult to resolve as there are no clear-cut remedies,” he said. “The Commission has a lot of work to do now, as this is new territory for them.”

The Australian Competition and Consumer Commission approved the deal earlier this month. Also, the U.S. Senate held a hearing in September regarding the proposed acquisition’s impact on competition and consumer privacy.

Timothy Kirkhope, Member of European Parliament for the U.K. Conservative Party wrote a letter to the EU Commissioner for Competition Neelie Kroes yesterday, asking her to open up a second phase investigation. He argued the deal would result in an unprecedented monopoly on online advertising in the European Union, and that it was clear that the two are direct competitors.

“I am deeply concerned regarding the impact the proposed Google/DoubleClick merger will have on the emerging internet advertising industry, and strongly urge the Commission to extend its review in order to afford the most thorough examination possible” he wrote.

Although a second phase investigation provides no real indication as to whether the European Commission will eventually approve the acquisition, there’s no doubt it will be perceived as a set-back for Google, as well as DoubleClick’s existing owners, Hellman and Friedman and JMI Equity.