Google Inc.’s proposed merger with online advertising server DoubleClick Inc. would create a giant that would control a huge portion of online advertising and hurt the Internet, opponents of the deal told U.S. lawmakers Thursday.
The merger, proposed in April, would create “extreme market concentration,” said Scott Cleland, chairman of Netcompetition.org, an advocacy group representing large broadband providers. The merger would leave online advertisers with “no real competitive choice,” he told the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights.
Microsoft Corp. General Counsel Brad Smith argued that the marriage of Google and DoubleClick will allow Google to control 70 percent of the search-based advertising market and 80 percent of the online display advertising market.
Smith, whose company is still under court supervision for its own 2002 antitrust settlement with the U.S. government, suggested regulators should reject the Google-DoubleClick merge on antitrust grounds.
“What are the economic consequences of allowing the largest company in online advertising to acquire its most significant competitor?” Smith said. “If Google and DoubleClick are allowed to merge, Google will become the overwhelmingly dominant pipeline for all forms of online advertising.”
But David Drummond, Google’s chief legal officer, argued that DoubleClick has a different business model than Google. “We are confident that our purchase of DoubleClick does not raise antitrust issues because of one simple fact: Google and DoubleClick do not compete with each other,” he said. “DoubleClick does not buy ads, sell ads, or buy or sell advertising space. We sell ads, DoubleClick delivers ads.”
Microsoft’s estimates of Google and DoubleClick controlling 80 percent of the display ad market is a “made-up number,” Drummond added.
Just over a month after Google announced plans to acquire DoubleClick for US$3.1 billion, Microsoft announced that it would said acquire aQuantive Inc., a digital marketing services agency, for $6 billion. Yahoo Inc. and AOL LLC have recently announced their own acquisitions in the online advertising space.
Cleland argued that the Google-DoubleClick deal represents the biggest threat to competition in online advertising. He called the U.S. government’s antitrust review “a watershed moment for Internet competition.”
Google’s own “uniquely monopolistic” mission statement says it wants to “organize the world’s information,” Cleland added. “No other entity currently has such a naked ambition to control or effectively corner the market for any of the world’s commodities, let alone all the world’s information,” he said.
In addition to the antitrust issues raised at the hearing, Marc Rotenberg, president of the Electronic Privacy Information Center, voiced concerns that the merger will have a huge effect on consumer privacy. The combined company would control a huge database of customer data, Rotenberg said.
Regulators in the U.S., Canada, Australia and Europe “appear to be in agreement that there is no merger that poses a more significant threat to online privacy than Google’s proposed acquisition of DoubleClick,” Rotenberg said. “This is going to be a real problem for the Internet if it’s allowed to go forward.”
Google believes “deeply in protecting online users’ privacy,” Drummond answered. Google has announced plans to make IP (Internet Protocol) addresses and cookies anonymous and the company is working on several other privacy initiatives, he said.
Senator Orrin Hatch, a Utah Republican, asked Google’s Drummond how the company can complain about the lack of broadband providers when its merger could create a dominant Internet advertising provider.
Companies wishing to advertise online have “many, many choices,” Drummond said, while most consumers have the choice of one or two broadband providers.
But Hatch also suggested to Microsoft’s Smith that Google could lose advertising marketshare if a better search engine comes along. “Where is the antitrust problem?” he said. “Why not just build a better product?”
The online advertising market is consolidating rapidly, Smith said. Companies wishing to advertise online will soon be left with one to three choices, he predicted.
