The FTC is now very likely to file an injunction in Federal Court to block Google's proposed acquisition of AdMob, if Google does not walk away from the deal, given that Bloomberg reports that the FTC is "seeking sworn declarations from Google Inc. competitors and advertisers."
- Why such signed declarations are particularly indicative of the likely outcome is that the FTC has moved largely from an investigative phase to largely a prosecution phase.
- Given reports of signed declarations, a preliminary decision has been made by the FTC investigative staff (with the assent of, or direction from, the FTC Chairman), that the deal would "substantially lessen competition." In other words, the FTC staff believe the deal would be a violation of antitrust law.
- Remember, neither the FTC nor competitors/advertisers take lightly the signing of legal declarations about what would be said under oath in a court of law under the penalty of perjury.
- While Google and others will argue that no official decision has been made until the full commission votes to block the deal, and the FTC formally files an injunction in Federal Court, the reality is that a majority of Commissioners are very likely to back the staff and the Chairman in their detailed assessment of the anti-competitive impact of this deal.
Apparently the FTC staff/Chairman has concluded that this is a clear-cut anti-competitive horizontal merger case where Google, the #2 competitor in in-application mobile advertising with >25% share is seeking to buy their #1 competitor in that market, AdMob, which has >50% share of the market.
- If the FTC staff has concluded that the market is some form of in-application mobile advertising, the Google-AdMob merger would effectively monopolize this strategically important gatekeeper market.
- For my detailed assessment of the anti-competitive problems of this deal see: Googleopoly V, and my recent analysis of the broader context of this deal.
With the FTC very likely to formally oppose Google-AdMob, what is Google likely to do?
Bottom-line: if Google's past behavior in these circumstances is a good indicator of how they will act in this circumstance, Google will likely play hardball and brinksmanship, but then blink and back down at the last minute.
First, they likely will play hardball and brinksmanship.
- In the Google-Yahoo Ad Agreement that DOJ blocked 11-5-08, Google took DOJ to the brink and only withdrew from the deal when DOJ was literally just a few hours away from filing a Section 1 & 2 Sherman antitrust monopolization case against Google, per Sandy Litvack, the DOJ's lead counsel on the matter.
- In the Google Book Settlement, Google has blown off the DOJ's detailed antitrust, copyright and class action objections in DOJ's statement of interest, in Google's formal 77-page response to Google's Book Settlement 2.0, effectively saying we'll meet you in Federal District Court Judge Chin's chambers.
Second, Google will likely blink and back down at the last minute when the FTC convinces Google that they indeed are resolute and are fully prepared to file an injunction against the deal in court, unless Google drops the AdMob acquisition.
In my analysis, I do not think Google is so unwise as to choose this particular deal and this set of facts as their first big antitrust battleground in court.
- Most importantly, the facts in this case are overwhelmingly against Google, if the court agrees with the FTC's definition of the market as essentially the business that AdMob is in and that Google is contesting.
- Moreover, Google will have a hard-time arguing that the relevant market should be much broader, given how much public evidence there is of Google arguing how much more targeted and measurable their advertising offering is than other forms of advertising.
- To use a military analogy, choosing this case as their first antitrust battleground would be the tactical equivalent of choosing to attack cliffs from a swamp with the sun in their eyes.
- Another big reason Google is likely to ultimately drop the acquisition of AdMob in the face of an FTC suit, is that Google does not want to trigger or egg on a potentially three-front antitrust war with the:
- FTC over AdMob;
- DOJ over the Google Book Settlement; and
- EU over the the monopolization complaints of Foundem, ejustice.FR and Ciao.
In short, reports that the FTC is formally arming for a court battle over Google-AdMob is a strong signal that the FTC will very likely block Google's acquisition of AdMob.
- When Google takes it to the brink, Google will most likely blink again like they did when faced with DOJ's opposition to Google-Yahoo.
- The last thing Google wants to do is have its own actions or recalcitrance be the catalyst for a much broader and more serious antitrust crackdown on Google's rapidly proliferating anti-competitive behavior.
So what does this development mean for Google going forward?
- Google's acquisition strategy involving companies of substantial size has hit an antitrust wall.
- The FTC has joined DOJ in believing Google is a monopoly that could warrant enforcement action in the future.
- The EU, which is generally more aggressive than the DOJ/FTC, is likely to eventually open a broader antitrust investigation of Google.
- Federal Court Judge Chin likely won't approve the Google Book Settlement without a consent decree that empowers the DOJ to have ongoing oversight over the competitive aspects of Google's book registry.
