Dont Expect Regulators to Block DoubleClick Deal

 
 
By John Pallatto  |  Posted 2007-04-16 Email Print this article Print
 
 
 
 
 
 
 

Opinion: Google's proposed $3.1 billion acquisition of DoubleClick will receive close scrutiny from government regulators. But there are strong indications that they won't have the legal grounds to block the buyout.

Despite the companys assertions to the contrary, Googles acquisition of Internet advertising network DoubleClick for the eyebrow-raising price of $3.1 billion is bound to pose serious antitrust questions in the minds of federal regulators.

The deal has Microsoft and AT&T, among others, claiming that the deal is anti-competitive. Microsoft senior vice president and general counsel Brad Smith said in a statement that the acquisition "raises serious competition and privacy concerns in that it gives the Google-DoubleClick combination unprecedented control in the delivery of online advertising, and access to a huge amount of consumer information by tracking what customers do online."
Microsoft was reportedly one of the parties, along with Yahoo, bidding to acquire the company. Since Microsoft is no stranger to anti-trust litigation, its highly ironic that it is now calling for regulatory intervention to halt a Google acquisition that thwarted its own efforts to become a major force in the Web ad serving business.
But dont expect the Justice Departments antitrust division to ride to the rescue of the ad serving market. While the acquisition will give Google control of a huge portion of this market, it might not be so easy for the government to prove in court that that the merger would violate existing antitrust law. Click here to read about the introduction of Google Apps Premier Edition. Thats the position taken by Scott Cleland, president of Precursor, a telecommunication industry research and consulting firm and chairman of NetCompetition.org, an online forum aimed at promoting "competitive Internet choices for consumers" through an open discussion of "net neutrality" legislation and regulation.
In a report on the antitrust implications of the acquisition, Cleland contends that Google "has figured out an ingenious, predatory, anti-competitive, acquisition strategy that exploits antitrust laws weak underbelly." The combination of Googles dominance in keyword search, DoubleClick "leadership" in online banner/video display advertising and YouTubes dominance in video search, will enable Google to control in excess of 80 percent of the "overall market for advertisements provided to third-party Web sites." However, despite this apparent overwhelming dominance, Cleland contends that there is little court precedent for blocking a vertical merger such as the Google/DoubleClick buyout. The government is also likely to have a difficult time proving that the merger is harmful to consumers because there is "a large and respected body of evidence that vertical mergers can produce real efficiencies that actually benefit consumers." There is also the argument that the merger will still leave a lot of small fry competitors in the market including Atlas Solutions, Accipiter, Adtech AG, Aquantive, EyeBlaster and Mediaplex. In fact, Dirk Freytag, CEO of Adtech AG in Frankfurt, Germany, contends the merger will generate new opportunities for his company as well as his competitors. Next Page: Raising ethics issues.



 
 
 
 
John Pallatto John Pallatto is eWEEK.com's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.
 
 
 
 
 
 
 

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