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New academic study challenges notion Google & DoubleClick aren't competitors

A new antitrust analysis by leading academics in the field provides some very relevant and eyebrow-raising new third-party survey data that appears to debunk Google's main defense of the DoubleClick acquisition: that Google and DoubleClick are not competitors. 

  • This first and most comprehensive market survey of advertisers suggests that DoubleClick's customers do indeed view Google and DoubleClick offering as substitutes/competitors for their ad dollars.  

For those following this merger review closely, this study is a must read:

Why is this study important?

  • First, Google's main defense of why this merger of two powerful Internet players in a highly concentrated market is not anti-competitive is that Google and DoubleClick are not real competitors. If in fact they don't compete, the merger would not be an anti-competitive concentration of market power "horizontally" in the same market.
    • This definition of the relevant market is highly significant to the ultimate outcome of this merger review.
      • If the FTC believes the merger is not a combination of competitors in the same "horizontal" market, the merger is more likely than not to be ultimately approved.
      • If, however, the FTC believes they indeed do compete with each other, and that this is a "horizontal" combination, the merger is at much greater risk of disapproval.
    • Thus the relevance and contribution of this new analysis, with its new third-party survey of how actual customers would react to changes in prices of DoubleClick's offerings, is telling.
      • The survey suggests that customers would indeed shift ad business away from DoubleClick, if their prices increased and that the most likely beneficiary of that shifted business would go to... surprise... Google!
      • Why this is so significant is that this survey is one of the investigative methods that the FTC views as most reliable in determining if a merger would yield anti-competitive effects.
      • At a minimum, it obligates FTC investigators to replicate this type of survey to either confirm or debunk this survey's facts and analysis.
  • The second major contribution of this academic analysis is to run several "HHI" indicies from different angles to see if this combination creates the "presumption of market power."
    • The HHI index is a common antitrust horthand tool (i.e. the sum of the squares of market shares) that suggests whether or not more investigation is warranted.
    • This study slices the HHI analysis in several different ways and in each cut, the presumption is that this is a highly concentrated market and that the combination would create market power.

Bottomline: This study's new third-party survey challenges the conventional wisdom that Google has created that Google and DoubleClick do not compete therefore this merger is not anti-competitive.

  • If the FTC's own surveys and investigation comport with this survey, that actual customers would shift business based on a price increase, that would be strong evidence that this merger would "substantially lessen competition" and put the merger at more serious risk of disapproval.