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Google-DoubleClick Privacy Concerns Prompt Senate Protest

Leaders of the Senate subcommittee that held an inquiry into Google's proposed acquisition of DoubleClick sent a letter to Federal Trade Commission Chairman Deborah Majoras yesterday urging a rigorous investigation of the merger.

The letter, sent by Sens. Herb Kohl, D-Wisc., Chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights, and Orrin Hatch, R-Utah, the ranking Republican member of the subcommittee, warns of the potential threats to competition and consumer privacy that the merger of two of the biggest players in online advertising could pose.

"This proposed acquisition would combine the world's largest Internet search company, Google, with DoubleClick, the leading company that places advertising on the Internet," the letter states. It urges the FTC to consider the extent to which Google's contextual advertising overlaps with DoubleClick's display advertising, and whether the two companies, as independents, compete with each other.

Google and DoubleClick both trade in online advertising, though they employ different business models. Google's algorithm-based AdSense serves up clickable links based on search queries, while DoubleClick places banner ads on Web sites.

The letter also calls for the FTC to consider "whether there are significant barriers to entry impeding new competitors in this market; and the likely effects of this acquisition on the cost of placing Internet advertising."

Since the announcement of the $3.1 billion purchase, Microsoft has lobbied to squelch the deal on competitive grounds, and privacy groups have raised concerns about Google acquiring DoubleClick's massive volume of data on consumers' purchases and other Internet activities.

The FTC opened its investigation in May.

The letter warns that the FTC must "guard against the creation of a powerful Internet conglomerate" that could hinder competition in the online advertising world by bringing multiple sectors of the market under the control of a single company.

"We have already worked with the FTC to address each of the questions raised in this letter, and we remain confident that the FTC will conclude that this deal is good for consumers, advertisers and Web-site publishers," Adam Kovacevich, Google's manager of global communications and public affairs, said in a statement.

"And though the FTC has stated publicly that privacy is not a factor in its review, Google is committed to protecting our users' privacy and has taken a number of industry-leading steps to do so."

He is referring to remarks made by FTC Commissioner Jon Leibowitz at the commission's Town Hall Meeting on E-havioral Advertising, the same meeting where he left open the possibility of a "do-not-track list" for online advertisers.

Randall Rothenberg, president of the Interactive Advertising Bureau (IAB), won't speak to the anti-competitive questions the senators raise, but he worries about the privacy issue creeping into the FTC investigation.

"The IAB doesn't take positions on the business-development affairs of our members," he told InternetNews.com. "That said, it is a concern when either legislative or regulatory bodies take issues that are by definition discrete -- in this case, privacy and competition -- and start twining them together."

Despite Leibowitz's suggestion that privacy would not be a major factor in the FTC's antitrust investigation, Rothenberg is more skeptical.

"We would be wrong to divorce the Town Hall from the privacy concerns. While the two have nothing to do with each other, the timing cannot be accidental," he said.

A subcommittee letter simply urging further investigation, as yesterday's missive did, hardly sounds a death knell for a proposed merger.

In an interview with InternetNews.com, Google's Kovacevich downplayed the significance of the letter, noting that the subcommittee "hardly ever sends a letter urging outright approval." It is much more common for the senators either to advise the regulatory agency to conduct a close investigation of a proposed merger or to block it altogether.

Kovacevich points to a letter sent in July 2005 by Kohl and former Sen. Mike Dewine, R-Ohio, then-chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights, to the FCC and Department of Justice warning that the proposed (and eventually approved) SBC-AT&T and Verizon-MCI acquisitions "raise very important competitive and communications policy issues and should be examined carefully."

That language is very similar to yesterday's letter, which warns that the "merger raises very important competition issues," but later states that "we have not reached any definitive conclusion regarding this issue."

Such a recommendation for close review stops well short of the sharply worded letter Kohl sent to the FCC and the DoJ in May urging that the merger of XM Satellite Radio and Sirius Satellite Radio "would cause substantial harm to competition and consumers."

The senators' letter comes one week after the European Commission decided to push its own investigation of the acquisition into the more rigorous phase two.

"The EC decision to send the merger to [phase two] could have prompted the senators to remind the FTC that they should do a thorough investigation, but I don't see yesterday's letter as doing much more than that," Rebecca Arbogast, principal at research analysis firm Stifel, Nicolaus, and Company, wrote in an e-mail to InternetNews.com.