In a letter to FTC Chairman Deborah Platt Majoras, Senators Herb Kohl (D-Wis.) and Orrin Hatch (R-Utah) urged the Commission to consider carefully the proposed US$3.1 billion acquisition by Internet search engine Google of the Internet advertising firm DoubleClick. Senator Kohl, the chairman of the Senate subcommittee on antitrust, competition policy, and consumer rights, and Senator Hatch, the ranking Republican on the Committee, hosted a hearing on the proposed acquisition in September. The hearing, which included testimony from representatives of Google and Microsoft Corporation (an outspoken critic of the merger) brought to light concerns about harm to competition and consumer privacy. According to Senators Kohl and Hatch, the implications of the merger “for the Internet advertising market – and for the Internet as a whole – are profound and potentially far-reaching.”
The FTC, which began investigating the transaction in May of this year, is considering the extent of overlap between the Internet advertising markets occupied by Google and DoubleClick. During the Senate subcommittee hearings, counsel for Microsoft argued that Google would be able to leverage its dominant position in the market for online search ads by obtaining a “dominant gateway position” to the other principal Internet advertising market, that of nonsearch advertising such as banner ads. If the merger were allowed to proceed, Microsoft warned, Google would become “the overwhelmingly dominant pipeline for all forms of online advertising.” Such alleged dominance would be due in part to Google’s ability to gather large amounts of information about consumers’ online behaviors and preferences, and apply such information to targeted online advertising. The prospect of Google’s expanded information gathering capacity has sparked widespread opposition by consumer groups over the lack of controls in place to ensure consumer privacy and security. Google, in response, insisted that the proposed acquisition does not raise competition concerns because the companies offer complementary – not competing – advertising services. It likened the companies’ relationship to that of FedEx Corp. and Amazon.com. Google added that online advertising “benefits consumers, promotes free speech and helps small businesses succeed,” and it further pledged to pursue these goals while protecting consumer privacy.
In their letter to Chairman Majoras, Senators Kohl and Hatch admitted that the subcommittee had reached no conclusions about the effect of the merger on the market for Internet advertising. The letter merely states, “We urge that you only approve the merger if you determine that it will not cause any substantial lessening of competition.” Notably, the Senators’ concerns are supported by the antitrust think-tank, the American Antitrust Institute, which published a memorandum in November warning of the harm to the Internet advertising market posed by the transaction.