EU to Review Google-DoubleClick Merger as Microsoft Meddles

Google (Nasdaq: GOOG) has formally asked the European Commission to review its acquisition of interactive advertising firm DoubleClick (Nasdaq: DCLK) . The next few weeks will be critical, as regulators and lawmakers on both sides of the Atlantic contemplate how -- or whether -- the merger should move forward.

The EC on Monday indicated that it had received Google's request and would decide by late next month whether to give the green light to its proposed US$3.1 billion acquisition of DoubleClick.

The agency's antitrust staff will decide by Oct. 26 whether to request more information on the proposed takeover. If it does not, the merger will get the go-ahead.

"We asked the European Commission to look at the proposed acquisition," said Julia Holtz, the search giant's lead antitrust counsel. "We believe this deal is positive for both users and advertisers, and fosters competition."

As a result of that move and related events in the United States, the next few weeks may be critical in determining if the deal goes ahead as proposed or if regulators demand some concessions. One possibility is that regulators will demand stricter privacy policies to help address some of the concerns about user data storage and sharing that would be possible after the merger.

Watching the Calendar

Later this week, a U.S. Senate Judiciary subcommittee in charge of antitrust issues will take up the deal. The committee has said the hearing will focus on both the competitive implications of the merger and the potential impact on consumer privacy.

Among the witnesses at that hearing will be Google's chief legal officer and Microsoft's (Nasdaq: MSFT) chief counsel, according to a list distributed by the subcommittee chairman, Sen. Herb Kohl, D-Wis. Privacy experts are also slated to testify.

Ahead of that hearing and the Federal Trade Commission's final decision, Microsoft reportedly has been lobbying hard for restrictions to be placed on the Google-DoubleClick deal.

Microsoft, whose own interactive advertising buy -- the $6 billion purchase of aQuantive -- moved through antitrust review in short order over the summer, has hired a public relations firm to push for tough review of the deal by lawmakers and regulators, the The Wall Street Journal reported Monday.

The firm, Burson-Marsteller, has been suggesting reporters pursue stories about the privacy implications of the deal in the U.S., according to the paper. In Europe, it reportedly is urging other Internet companies to visit the www.i-comp.org Web site and join a call for tough review of the competitive fallout that might occur.

Many Voices

Regulators are considering varying points of view, including concerns raised by privacy groups about the merger. DoubleClick is no stranger to privacy concerns; its early use of cookies to track user movements online drew the ire of privacy advocates a decade ago. The Electronic Privacy Information Center (EPIC) has urged the FTC to approve the deal only if Google agrees to abide by limitations on how it uses and stores personal data about Web users.

EPIC has successfully lobbied the FTC into action on Web privacy in the past, Executive Director Marc Rotenberg pointed out, notably in response to a complaint against Microsoft's Passport electronic wallet program.

The sheer volume of the data and the number of consumers impacted in the Google case make it unique, he said, noting that Google is expected to propose a global standard for Internet privacy.

"You're dealing with the largest search company and the largest [online] advertising company," Rotenberg told the E-Commerce Times. "Neither has a particularly [strong] track record when it comes to protecting online privacy . A combination would pose a substantial threat to the privacy interests of Internet users."

For Google, the fact that the process has dragged on -- with the FTC issuing a second request for information and lawmakers now taking up the issue in the public spotlight -- increases the odds that it will have to make concessions, Yankee Group analyst Laura DiDio told the E-Commerce Times.

At the same time, Google may be looking to move the European process forward in the hope that a green light there would provide some assurance for regulators in the U.S.

"This merger is difficult for regulators because the market is just beginning to take shape," DiDio said. "The impacts of what happens today may not be felt for several years -- and that's inherently difficult to predict and even harder to regulate."

Google has begun its own public relations effort in support of the merger, using its new policy blog to highlight its benefits, along with the steps it is taking to protect consumer privacy.

"Advertising is information, and relevant advertising is information that is useful to consumers," Policy Counsel Pablo Chavez wrote in the blog recently, reiterating comments he made to the FTC ahead of a planned Town Hall forum on the topic of privacy slated for early November. "We think our acquisition of DoubleClick provides an opportunity for us to bolster privacy even further."