Thursday, December 20, 2007

FTC Closes Antitrust Investigation into Google/DoubleClick Combination

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reports.

Explaining that the “sole purpose of federal antitrust review of mergers and acquisitions is to identify and remedy transactions that harm competition,” the FTC announced its decision to close its eight-month investigation into the Google Inc.’s proposed $3.1 billion acquisition of Internet advertising server DoubleClick Inc.

Although consumer groups had raised concerns about the proposed acquisition’s impact on consumer privacy, the agency limited its review to the transaction’s impact on competition. In a four-to-one vote, the Commission concluded that the proposed acquisition was unlikely to substantially lessen competition.

According to the Commission statement, Google and DoubleClick are not direct competitors in any relevant antitrust market. Google, the ubiquitous search engine provider, sells advertising space. Through its ad intermediation product—AdWords business—Google is the dominant provider of sponsored search advertising. DoubleClick does not sell any form of advertising, including sponsored search advertising. Rather, it is the leading firm in third-party ad serving markets.

While Google had been attempting to develop a third-party ad serving solution at the time of the transaction, and therefore was a potential future competitor of DoubleClick, it has not released or sold a commercially viable ad serving product in the United States.

Competitive Effects Analysis

The transaction was analyzed under three theories of potential competitive harm: (1) whether the merger threatened to eliminate direct and substantial competition between Google and DoubleClick; (2) whether the merger threatened to eliminate potential competition; and (3) whether there was any non-horizontal theory of 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. Under any of these three theories, the transaction did not threaten to eliminate competition or potential competition.

Dissenting Statement

Commissioner Pamela Jones Harbour voted against the decision to close the investigation and issued a dissenting statement. “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,” she wrote. Commissioner Harbour noted troubling horizontal overlaps that might have provided a predicate for the Commission to impose conditions on the merger. She also suggested that the Commission could have utilized the full scope of its statutory powers to not only ensure competition was not harmed, but also to address the privacy issues raised by the merger.

A news release on the Commission action, a 13-page “Statement of the Federal Trade Commission,” and the 13-page dissent appear at the FTC website. The documents will appear at CCH Trade Regulation Reports ¶16,092.

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