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The American Antitrust Institute fired off a white paper Tuesday arguing that Google Inc.'s [GOOG] pending $3.1 billion agreement to acquire DoubleClick Inc. will hurt competition in the online advertising market.
This isn't the first such message from consumer advocacy groups, but the AAI's 13-page report goes into more detail than we've seen in the past few months. AAI argues that, despite Google's claims, new online ad products introduced by it and DoubleClick do compete and that rivalry would have increased in the future. The report cites the federal government's Horizontal Merger Guidelines in making the case that the future state of competition, and its effect on pricing, is as critical to consider as the current environment. The guidelines were put together by U.S. antitrust enforcers to help lawmakers understand how they size up a merger's impact on a given market.
In a nutshell, AAI says that the markets for brokering Web publishers' online ad space and the tools that let publishers serve ads are already concentrated, adding that merging Google and DoubleClick would make things worse. Moreover, the size and popularity of the publisher network created by the merger would create an unfair barrier to entry.
As it usually does, the argument hinges on whether Google and DoubleClick operate in the same markets. Antitrust lawyers have told us that they don't, and have predicted that it is unlikely the Federal Trade Commission will block the deal when it completes its review, probably later this month.
Of course there's the whole privacy issue, which the AAI report doesn't address. Critics argue that the deal would put a huge amount of information on Internet users into the hands of the merged company. While FTC Commissioner Jon Liebowitz reiterated last week that the merger review focuses on antitrust issues, the agency continues to investigate the privacy implications of the deal in a separate probe.
Republican lawmakers are beating the drums on this topic too. Texas Republican Joe Barton is calling for hearings on the privacy issues surrounding the deal. "Google is an information colossus already, but add on DoubleClick's marketing power and you produce a single commercial entity that can know more about you and me than nearly everybody but mom and the IRS," said Barton in a statement. Despite today's hubbub, the FTC is still a good bet to clear the deal. Fact is, 95% of all mergers get approved by antitrust regulators without a hitch, and the agencies have a dismal record of court wins in antitrust cases. Our money is on the acquisition going through. If Google faces a real threat, it's in Europe, where antitrust regulators police mergers more rigorously. - Olaf de Senerpont Domis and Bill McConnell
See Nov. 6 white paper from AAI
See April 13 story from The Deal newsweekly
See April 2006 story from The Deal newsweekly
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