Pressure Mounts on Google/DoubleClick
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With a decision from the Federal Trade Commission (FTC) on the Google/DoubleClick merger imminent, two groups warning of privacy concerns with the combined company are ramping up their efforts to stamp privacy measures on the deal.
Speaking in a joint telephone press briefing, the heads of the Electronic Privacy Information Center (EPIC) and the Center for Digital Democracy (CDD) said the commissioners are duty-bound to look at privacy concerns in their review of the merger between the two leaders in their respective sectors of online advertising.
After their call for Chairman Deborah Platt Majoras to recuse herself from the inquiry because of a potential conflict of interest was rejected, the groups are now exploring legal options to force the recusal.
Majoras used to work for Jones Day, the law firm that DoubleClick has retained to advise it in the merger proceedings. Majoras' husband is currently a non-equity partner at the firm. DoubleClick and the FTC have said that Jones Day is not involved in the U.S. government's consideration of the matter, and has never appeared before the FTC on behalf of DoubleClick.
Marc Rotenberg, executive director of EPIC, said that the groups are moving quickly to mount a legal challenge against Majoras' decision not to recuse. They are currently trying to decide the best venue in which to seek a judicial review, on what law they would base their claim and whether they should file the challenge immediately, or, given that a decision from the FTC on the merger could come as early as this week, whether they should wait until after the announcement is made.
Irrespective of the recusal issue, CDD Executive Director Jeff Chester said that the groups would call on Congress to intervene should the FTC approve the merger without significant privacy safeguards.
"Dealing with new media mergers in this part of the century, you cannot separate the data collection of online business and privacy," Chester said. "Truly in my mind, it's one of the most important media mergers ever."
The privacy concerns arise from the prospect of combining the cookies that DoubleClick places on users' computers with Google's server logs, the repositories of all searches users maker through the company's search engine.
Google's algorithm-based AdSense serves up clickable links based on search queries, while DoubleClick places banner ads on Web sites. The FTC began its review in May.
Rotenberg believes that the FTC is likely to incorporate some of the privacy protections the petitioners called for into its final approval of the merger. Top on their list is language that would require Google to be more transparent with its data collection, limit the amount of time that it retains users' information and keep its server logs segregated from DoubleClick's cookie jar.
Less optimistic, Chester said he is already looking ahead to the tougher fight the merger is facing in Europe, where it is under review by the European Commission. Yesterday, European lawmakers called for the regulators to hold a meeting next month to take a closer look at the privacy concerns. The meeting will be held Jan. 21 in Brussels; Rothenberg will be one of the participants. The EC is scheduled to complete its review by April 2.
"What doesn't get addressed here is likely to get another examination over in Europe," Chester said.
In practice, the companies could not begin operating as a combine until both the EC and FTC approved the deal, according to Rebecca Arbogast, principal at research and analysis firm Stifel Nicolaus. That means that the EC review could present the biggest obstacle for the acquisition, since even if Majoras (who supports the merger) bowed out, the vote among the remaining four commissioners would likely be tied 2-2, which by FTC rules would be enough to approve it.
In the United States, one of the fundamental issues at play is whether privacy considerations should even factor into FTC merger reviews, which typically focus on anticompetitive concerns.
Rotenberg said that the FTC's legal obligation to investigate privacy concerns involving the merger is rooted in section 5 of the Federal Trade Commission Act, which gives the Commission the mandate to prevent unfair or deceptive business practices.
EPIC, CDD and the U.S. Public Interest Research Group submitted a petition to the FTC in April calling for a full review of the proposed merger. In the complaint, the groups suggest that the two companies do not put forth sufficient effort to protect the data they collect, and that the merger could be injurious to consumers. Therefore, they argue, the language of the FTC Act that gives the agency a mandate to prevent "unfair or deceptive acts or practices" also requires it to insert significant privacy safeguards into approval of the merger.
To Google, the argument that does not hold. Adam Kovacevich, a spokesman for the company, has told InternetNews.com that while Google is committed to protecting its customers' privacy, the Commission has already said that privacy will not be a factor in the review.
Kovacevich was referring to a comment by Commissioner Jon Leibowitz, who said that the review "can't be about privacy, per se."
When asked about Leibowitz's comment, the CDD's Chester suggested the reporter ask the commissioner if he still feels that way, calling the statement "premature."
Chester said that the FTC commissioners are all deeply concerned about the privacy implications of a Google/DoubleClick combine - specifically the merging of the two companies' usage logs - but that so far they have been hemmed in by "timidity and legalistic narrowness," and have been "ducking the issue."
"If the commissioners fail to act in what they personally believe it will be a violation of trust," he said.