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In a move that caught many by surprise last month, technology giant Microsoft asked regulators to review Google’s USD 3.1bn acquisition of DoubleClick.
Seattle, Washington-based Microsoft said the combination would “substantially reduce competition in the advertising market on the Web,” according to a report in the New York Times citing Microsoft’s general counsel. The same paper now reports that the FTC will look at the deal, rather than the Department of Justic as previously thought.
Although Google would no doubt own a large portion of the online advertising market, antitrust concerns are unlikely to stick, an industry analyst argued.
That is because Google and DoubleClick clients are free to switch to competitors aQuantive or 24/7 Real Media, said David Moore, 24/7 Real Media’s CEO, shortly after the deal was announced. “I don’t think that’s going to hold it up,” Moore said, regarding the antitrust concerns. “All the DoubleClick clients [are clients] because they choose to be clients,” he said. “They can use me. We’ve been getting a lot of those calls.”
If Google can show that its customers are free to switch to other competitors, it may have a legitimate defense against government antitrust concerns, said Barry Hawk, an antitrust partner with Skadden, Arps, Slate, Meagher & Flom LLP. “Obviously, the best thing would be if the customers all went in and said ‘we strongly support this,’ or the customers were neutral or not concerned.”
He explained that in the US, customer reaction to a deal was extremely important in determining whether a deal caused legitimate competition concerns. Relevant facts to a customer-switching defense could include facts showing that if Google merged with DoubleClick and raised its prices customers would switch or that, in fact, customers had switched prior to the merger, according to Hawk.
Microsoft’s review request is particularly surprising in light of its long history of defending itself from antitrust claims in the US and abroad.
Indeed, Microsoft’s antitrust arguments to the government could be weakened due to its history of fighting off antitrust bundling issues in the US and Europe, argued a source close to Google. Authorities reviewing this situation might view Microsoft as reversing its position or ‘singing a different song,’ making it harder for it to present its argument against the Google/DoubleClick deal.
In part because of that past, the company’s antitrust concerns may be seriously felt by Microsoft, Hawk said. He pointed out that Microsoft had years of experience in fights over market definition. “They have to be very careful they don’t make bad law,” he said. The fact that despite the business risk of making bad law for itself, as well as the bad publicity involved, Microsoft was proceeding against Google likely meant it was sincere about its publicly stated antitrust concerns regarding the Google-DoubleClick deal, he said.
The most important antitrust issue likely to emerge in relation to this deal was how narrowly or expansively the online advertising market was defined, Hawk said.
The source said it was unclear as yet how the market would be defined.
Broken into online advertising sub-sectors, DoubleClick is the market leader in both the digital advertising and publishing markets, said 24/7 Real Media’s Moore. He estimated that DoubleClick had a 75 to 80% market share in the advertising market, and a 55 to 60% market share in the publishing market. In advertising, aQuantive’s Atlas and ValueClick’s Mediaplex were DoubleClick’s two largest competitors. 24/7 Real Media, with a 30% market share, was DoubleClick’s largest competitor in the publishing arena.
If Google was to acquire DoubleClick, Google would then control 40 to 50% of online advertising dollars, one industry analyst estimated. In March, Google had 48.3% of the US search engine market, according to media measurement provider comScore.
Following the deal, DoubleClick issued a statement on data ownership. “Since the announcement of Google’s intention to acquire DoubleClick, several media reports have incorrectly suggested that data collected by the company’s online display advertising technology could be used by Google, or combined with information owned by Google. This is simply not the case. Information collected by DoubleClick DART ad serving technology belongs to DoubleClick’s clients and not to DoubleClick. Any and all information collected by DoubleClick is, and will remain, the property of the company’s clients. Ownership rights, like the other terms of DoubleClick’s client contracts, will be unaffected by any acquisition. Further, Google would not be able to match its search data to the data collected by DoubleClick, as DoubleClick does not have the right to use its clients’ data for such purposes.”
Microsoft and Google have market capitalizations of USD 280bn and USD 148bn, respectively.
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