The US Federal Trade Commission (FTC) has opened a preliminary antitrust investigation into Google’s planned $3.1-billion (Rs12,400 crore) purchase of the online advertising company DoubleClick, an industry executive briefed on the agency’s plans said on Monday.
The inquiry began at the end of last week, after it was decided that FTC instead of the justice department would conduct the review, said the executive, who asked not to be identified because he had not been authorized to speak on the matter. The two agencies split the duties of antitrust enforcement.
An FTC spokesman said the agency did not comment on pending inquiries.
The deal, involving powerful forces in their respective niches of the online advertising business, prompted privacy advocates and competitors to raise concerns after it was announced last month. Those concerns and the deal’s size made a preliminary investigation all but certain, according to antitrust experts.
Within a few weeks, perhaps within days, FTC will decide whether to escalate its investigation into the Google deal, antitrust experts say. That step, known as a “second request” for information, would suggest that the proposed acquisition raises more serious antitrust issues. Google said it was confident that the deal would withstand scrutiny.
Privacy groups said it was significant that FTC, the agency that monitors online privacy issues, would be conducting the review. “We think it’s very important that FTC is taking a look at the Google-DoubleClick deal," said Marc Rotenberg, executive director of the Electronic Privacy Information Center, a privacy rights group.
In the days after the planned merger was announced, Rotenberg’s centre and two other advocacy groups, the Center for Digital Democracy and the US Public Interest Research Group, filed a request for FTC to investigate the privacy implications.
In the complaint, the groups noted that Google collects the search histories of its users, while DoubleClick tracks what websites people visit. The merger, according to their complaint, would “give one company access to more information about the Internet activities of consumers than any other company in the world”.
Google has built a lucrative business in selling small text ads that appear alongside its search results and on other websites. DoubleClick is the leader among companies that specialize in placing graphical and video ads online.
Jeff Chester, executive director of the Centre for Digital Democracy, said that decisions made now about the structure of the online advertising industry could have lasting effects on data collection and personal privacy on the Internet, especially if control rests with a “few powerful gatekeepers” led by Google.
Still, privacy issues are not typically the concern of antitrust officials. In reviewing a proposed merger, legal experts say, regulators weigh the likely impact on competition and struggle with tricky technical matters like defining the relevant market to measure.
“To the extent that a reduction in competition could make it more difficult to protect privacy, it could be a consideration,” said Andrew I. Gavil, a law professor at Howard University. “But it would have to be linked to competition. Strictly speaking, privacy is not an antitrust issue.”
Google, the Internet search giant, is facing questions about its privacy practices not only from advocacy groups in the US, but also from an advisory panel for the European Union. The company has said it welcomes the debate. It defends its privacy safeguards and says its business is based on consumer trust.
As for the DoubleClick acquisition, Google on Monday repeated its optimism that antitrust regulators would approve the deal.
“We are confident that upon further review, FTC will conclude that this acquisition poses no risk to competition and should be approved,” said Don Harrison, a senior corporate counsel for Google.
Harrison pointed to the flurry of deals in recent weeks, after Google announced its bid for DoubleClick on 13 April. Later in the month, Yahoo announced it would pay $680 million for 80% of Right Media, an online ad exchange, that it did not already own.
In May, WPP, the big ad agency, said it would pay $649 million for 24/7 Real Media, whose ad serving business competes with DoubleClick. And then Microsoft, which pushed for an antitrust investigation of the Google-DoubleClick deal, agreed to pay $6 billion for aQuantive, an Internet ad company. One of aQuantive’s units, Atlas, competes with DoubleClick.
Harrison said that “the online advertising industry is a dynamic and evolving space—as evidenced by a number of recently announced acquisitions”. And he added that “rich competition in this industry will bring more relevant ads to consumers and more choices for advertisers and website publishers”.