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12/20. The Federal Trade Commission (FTC)
announced that it will not seek to block the proposed merger of Google and
DoubleClick, or impose any conditions upon the merger.
The FTC wrote in a brief
letter [1
page in PDF] to Google that "Upon further review of this
matter, it now appears that no further action is warranted by the Commission at
this time. Accordingly, the investigation has been closed. This action is not to
be construed as a determination that a violation may not have occurred, just as
the pendency of an investigation should not be construed as a determination that
a violation has occurred. The Commission reserves the right to take such further
action as the public interest may require."
The Commission's vote was 4-1, with Commissioner
Pamela Harbour dissenting.
Chairman Deborah Majoras,
and Commissioners William
Kovacic, Thomas Rosch
and Jonathan Liebowitz
voted to close the investigation. The Commission released a
statement
[13 pages in PDF], and two Commissioners released individual statements.
The transaction has yet to receive the approval of the European Commission.
Impact of Merger Upon Competition. Section 7 of the Clayton Act, which is codified at
15
U.S.C. § 18, prohibits acquisitions or mergers, the effect of which "may be
substantially to lessen competition, or to tend to create a monopoly."
The FTC concluded that "Google's proposed acquisition of
DoubleClick is unlikely to substantially lessen competition".
First, it concluded that the merger does not threaten to
eliminate direct and substantial competition between Google and DoubleClick. It
reasoned that the two companies provide products in different markets.
It wrote that "Google sells advertising on its search engine and
through its ad intermediation product, AdSense. It had been developing a third
party ad serving solution prior to its agreement to purchase DoubleClick, but it
had not released a commercially viable product."
In contrast, "DoubleClick sells two third party ad serving
products -- DART for Advertisers (``DFA´´) and DART for Publishers (``DFP´´). It
does not buy or sell advertisements or advertising inventory."
Second, it concluded that the merger does not threaten to
eliminate potential competition in any relevant market. It concedes that "Google
had been attempting to develop a third party ad serving solution at the time of
the transaction, and therefore is a potential future competitor of DoubleClick
and other third party ad serving firms."
However, it continued that "For the elimination of this
potential competition to be a competitive concern, Google must be uniquely
positioned to have a substantial competition-enhancing effect on the third party
ad serving markets."
It concluded that it does not. It explained that "Google's entry
is unlikely to have a significant procompetitive effect because the evidence
shows that the third party ad serving markets are competitive despite relatively
high levels of concentration in both markets. Although DoubleClick enjoys a
significant share of today's third party ad serving markets, it does not appear
that DoubleClick has market power in these markets."
Finally, the FTC concluded that the evidence in the record does
not support any theory of non-horizontal harm "such as the possibility that
Google could leverage DoubleClick’s leading position in third party ad serving
to its advantage in the ad intermediation market."
Commissioner Liebowitz wrote in his
statement [PDF] that
while he concurred in the decision, there are "serious vertical competition
issues".
Commissioner Harbour wrote in her dissenting
statement [13
pages in PDF] that Section 7 is "inherently forward-looking", and that she makes
"alternate predictions about where this market is heading, and the
transformative role the combined Google/DoubleClick will play if the proposed
acquisition is consummated."
Harbour elaborated that "But for Google's acquisition of
DoubleClick, the parties likely would have competed head-to-head in the market
for third party ad serving tools. Prior to the announcement of the deal, Google
was developing and beta-testing its own third party ad serving solution, Google
for Publishers and Google for Advertisers, which would have competed against
DoubleClick’s DART for Publishers and DART for Advertisers. Development efforts
ceased once the proposed acquisition of DoubleClick was announced."
She argued that "It is difficult to believe that Google -- with
a market capitalization of nearly $207 billion, a top-notch engineering team,
and a wealth of connections among publishers and advertisers -- would have been
unable to refine its beta product and release a highly competitive third party
ad serving solution of its own. Third party ad serving customers likely would
have benefitted from both price and innovation competition as a result of
Google’s entry efforts."
Impact of Merger Upon Privacy. The FTC statement notes that "some have urged
the Commission to oppose Google's proposed acquisition of DoubleClick based on the
theory that the combination of their respective data sets of consumer
information could be exploited in a way that threatens consumers’ privacy."
The FTC wrote that it "has been asked before to intervene in transactions for reasons
unrelated to antitrust concerns, such as concerns about environmental quality or impact on
employees. Although such issues may present important policy questions for the Nation, the
sole purpose of federal antitrust review of mergers and acquisitions is to identify and
remedy transactions that harm competition."
It "concluded that privacy considerations, as
such, do not provide a basis to challenge this transaction."
Commissioner Harbour did not dissent from this conclusion, but nevertheless wrote in her
statement that "The parties claim to place a high value on protecting consumer privacy.
In various fora, both public and private, senior corporate officials have offered assurances
that the combined firm will not use consumer data inappropriately. But charged as I am
with protecting the interests of consumers, I am uncomfortable accepting the
merging parties' nonbinding representations at face value. The truth is, we
really do not know what Google/DoubleClick can or will do with its trove of
information about consumers' Internet habits. The merger creates a firm with
vast knowledge of consumer preferences, subject to very little accountability."
Commissioner Leibowitz wrote in his statement that "we still
need to address the fundamental issues of consumer privacy and data security
raised by online behavioral advertising, which go well beyond the two companies
involved in this acquisition. As the Internet has evolved, online tracking and
ad targeting have become more sophisticated, more pervasive, and more granular."
The Electronic Privacy Information Center (EPIC)
released a statement
[3 pages in PDF] in which it asserted that the FTC legally could, and should, have blocked or
imposed conditions upon this merger because of its impact upon consumers' privacy.
The EPIC offered the explanation that "unlike typical merger reviews where the
Commission may assume that the market analysis of suppliers and consumers captures all of
the relevant parties, the market for Internet-based advertising is different. These companies
target individual consumers based on their interests, their activities, even their
personal behaviors. The ``consumers´´ for Internet advertisers are web-based
publishers. Assuming there is healthy competition, they make choices among
competitors for advertising services. But for the consumer whose data is
gathered, there is no choice. The market relationship exists between the
advertiser and the publisher. It does not include the consumer."
Hence, it concluded that there is a "market failure", and that the FTC "has
a responsibility to address the problem".
Jones Day and Mr. and Mrs. Majoras. The EPIC previously requested that
FTC Chairman Majoras be recused. See, story titled "EPIC Seeks Recusal of
Majoras in Google Doubleclick Merger Review" in TLJ Daily E-Mail Alert No.
1,688, December 13, 2007.
She participated in this decision.
The EPIC wrote in a December 12
filing [PDF] with
the FTC that DoubleClick "has retained the Washington law firm of Jones Day to represent
the company before the Federal Trade Commission in the pending merger review." It added
that Deborah Majoras "is a former equity partner of the law firm Jones Day" and that
her husband, John Majoras, "is currently
an equity partner with the law firm Jones Day".
The EPIC's just released statement adds that "We remain troubled
by the role of the Jones Day law firm in this proceeding. The ties between the
Federal Trade Commission and the Washington office of Jones Day are everywhere
apparent, even leading up to the recent hiring by Jones Day of key Commission
staff while the merger review was taking place. This should be investigated."
More Reaction. Ed Black, head of the Computer
& Communications Industry Association (CCIA), stated in a release that "This
merger will likely spur innovation and enhance competition in the online advertising arena.
The recent high-profile acquisitions involving Doubleclick competitors and other innovative
Internet companies demonstrate that the online advertising space is a highly competitive,
rapidly changing segment of the advertisement marketplace, with many options for
customers."
The Competitive Enterprise Institute (CEI) stated in a
release that "The political
controversy surrounding the merger highlights the inadequacies of antitrust law in a 21st
century economy. Smoke-stack era laws do not foster entrepreneurship or protect
consumers -- they stifle competition and drive away innovators.
Leslie Harris, head of the Center for Democracy and
Technology (CDT), stated in a release that "It is now important for Google to step
up and make a clear, public statement about its plans for proactively protecting consumer
privacy. Such a move on Google's part would send a strong message to consumers and an industry
that continues to struggle with privacy issues as online advertising evolves."
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