FEDERAL TRADE COMMISSION CLOSES GOOGLE/DOUBLECLICK INVESTIGATION

On December 20, 2007 the Federal Trade Commission announced that it will not seek to block Google Inc.’s proposed $3.1 billion acquisition of Internet advertising server DoubleClick Inc. In a 4-1 vote to close its eight-month investigation of the transaction, the Commission wrote in its majority statement that “after carefully reviewing the evidence, we have concluded that Google’s proposed acquisition of DoubleClick is unlikely to substantially lessen competition.”

Although interested parties raised concerns about the proposed acquisition’s impact on consumer privacy, the Commission observed that such issues are “not unique to Google and DoubleClick,” and “extend to the entire online advertising marketplace. Adding that it takes consumer privacy issues very seriously, the Commission cross-referenced its release of a set of proposed behavioral marketing principles that were also announced.

Agency staff analyzed three principal theories of potential competitive harm.

First, it sought to determine whether Google’s acquisition of DoubleClick threatened to eliminate direct and substantial competition between the two companies. Its analysis of the evidence showed that the companies are not direct competitors in any relevant antitrust market, eliminating the need for further analysis.

Next, because mergers and acquisitions may also eliminate beneficial potential competition, the agency examined the implications of Google’s continuing efforts to enter the third party ad serving markets. If these efforts had the potential to eliminate a competitor that was uniquely positioned to have a pro-competitive effect on these markets, that would raise antitrust concerns. The agency’s evidence, however, showed that current competition among firms in this market is vigorous, and will likely increase.

Finally, the agency evaluated whether Google’s acquisition of DoubleClick could harm competition by allowing Google to exploit DoubleClick’s position in the third party ad serving markets to the benefit of Google’s ad intermediation product, AdSense. In some instances, according to the Commission, a proposed transaction may allow a dominant seller of one product to harm competition in the market for a related complementary product, for example, by exclusively bundling – or otherwise tying together – its product with the acquired firm’s product after the acquisition. Such a strategy, however, can only be anticompetitive if the merged firm has market power.

As explained in the Commission’s statement, because the evidence failed to show that DoubleClick has market power in the third party ad serving markets, it is unlikely that Google could effectively foreclose competition in the related ad intermediation market following the acquisition.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com