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Why FTC review of GoogleDoubleClick is significant

Both the New York Times and the Wall Street Journal are reporting that the Federal Trade Commission (FTC) will substantively investigate the proposed Google-DoubleClick merger.

  • This comes on the heels of an AP report that "an Independent European Union panel has launched an investigation into whether Google Inc.'s Internet search engine abides by European Union privacy rules." Google's search share in Europe is reportedly 75% and 90% in Germany, so we should all expect the EU to also play a formal and significant role in the review of Google-Doubleclick.

Why is the FTC review development significant?

  1. Both the FTC and the DOJ lobbied strongly for jurisdiction over this deal because both recognized it as a deal that got to the heart of the business model of the Internet going forward. (Microsoft's copycat/catchup attempt in buying aQuantive/Atlas only affirms both organizations' extremely high interest in reviewing this deal.)
  • The DOJ argued they should get jurisdiction, given they have experience in advertising and just-reviewed the Google-YouTube transaction (lightly).
  • The FTC has been positioning itself as the consumer protection cop of the Internet, filling a vacuum provided by the FCC.
  • The FTC also has a major pending complaint from the Electronic Privacy Information Center (EPIC) which claims Google and DoubleClick are engaged in deceptive and unfair trade practices and that the combined company would have more private info than any other company.
  • The FTC also has positioned itself squarely in the middle of the net neutrality debate having hosted the Broadband Connectivity workshop and is expected to issue a big report on net neutrality this summer.   
  • Google is not happy the FTC got jurisdiction as it will mean a much tougher and broader investigation into the deal than would have likely occurred at the DOJ. 
    • This DOJ is accurately viewed as one of the most merger-friendly in history.
    • The minor scrutiny that the Google-YouTube merger received also suggests that DOJ would have been a more known-quantity and friendly place for Google to be reviewed.
      • The fact that Google -DoublClick covers some of the very same territory as the YouTube transaction suggests that the FTC may take a different tack than the DOJ did.  
  • The FTC process is more problematic than the DOJ even though both bodies are highly professional and confidential in their investigations. 
    • That being said the DOJ is a single adjudicator/decision maker and much more cloistered from public view than the FTC.
    • This deal ultimately will be reviewed by five FTC commissioners which is siginificant because two Democratic voices will be able to vote, and because these five commissioners are much more public personas and interact with the public and media much more than the DOJ chief.
    • Process matters. The deal being reviewed by the FTC means it will naturally be a more:
      • public, 
      • politically-influenced, and
      • multiple issue deal (with privacy/consumer protection/fraud/net neutrality in the mix).     
  • If the DOJ gets to review the Microsoft-aQuantive deal, which is likely, given that the DOJ oversees Microsoft's decree, there will be the unusual circumstance that this online ad market will be scrutinized by both organizations' experts at the same time.
    • This could mean even greater scrutiny than normal because of the natural competition between the staffs for which one best understands the market and the potential for anti-competitive problems.

    In conclusion, I think many people will be surprised with the intense scrutiny this merger will undergo.

    I also believe that the more information that comes out on this merger in the months ahead, people and the markets will recognize that this merger is no slam-dunk for approval -- it faces real disapproval risk.