Google gets a warning from Congress
November 19, 2007
The U.S. Senate today fired a warning shot across Google's bow. In a rare bipartisan move, the top two members of the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, Democrat Herb Kohl and Republican Orrin Hatch, sent a strongly worded joint letter to Federal Trade Commission Chairman Deborah Majoras urging that the FTC take a particularly hard look at the ramifications of Google's proposed acquisition of the ad network DoubleClick.
"The implications of this [deal] for the Internet advertising market - and for the Internet as a whole - are profound and potentially far reaching," the Senators wrote:
Industry experts that we spoke to in the course of our inquiry raised serious concerns that combining these two companies' leading positions in these two forms of Internet advertising could cause significant harm to competition in the Internet advertising marketplace. While we have not reached any definitive conclusion regarding this issue, we urge that you only approve the merger if you determine that it will not cause any substantial lessening of competition with respect to Internet advertising. After our hearing, it is plain that the issues important to this determination are: whether contextual and display advertising are interchangeable and substitutable; the extent to which Google's services compete with DoubleClick's ad serving services; 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.
They also underscore their privacy concerns related to the merger:
DoubleClick collects an enormous quantity of information on individual web users' preferences, and privacy advocates have expressed very serious concerns regarding the consequences of this data coming under the control of Google due to the fact that Google is the dominant internet search engine and can also track individuals' search requests. Therefore, we believe that this deal raises fundamental consumer privacy concerns worthy of serious scrutiny.
They conclude: "Antitrust regulators need to be wary to guard against the creation of a poweful Internet conglomerate able to extend its market power in one market into adjacent markets, to the detriment of competition and consumers."
As the Financial Times suggests, the letter is unlikely to scuttle the deal - European clearance remains a bigger hurdle for Google - but it does underscore a growing governmental awareness of Google's expanding power over the Net and the risks it entails. We may eventually come to see the letter as marking the end of the government's laissez-faire attitude toward online commerce and competition.
UPDATE: Danny Sullivan argues that the senators are barking up the wrong tree.
There’s a famous Zen koan that ends, “I always knew Persians had red beards – and now I know a Persian who has a red beard.” It describes a situation in which a student displays knowledge that the master knew he possessed, but which he had not expressed.
I think there’s a little of this phenomenon in the Congressional reaction to Google/DoubleClick. There was a time at which public policy debate was largely focused on the potentially-deleterious effects of a “digital divide” which would further depress opportunities available to the poor. Now, Congress seems to have come to an understanding that it isn’t our access to the Internet which is the issue – it’s the Internet’s access to us.
The issue of market control is certainly real, but arguably, Google has achieved/will achieve that with or without DoubleClick. Personally, even though I agree with your implication that Congress should worry about the consolidation of Net marketing power, I’d be okay with the letter not marking the end of a laissez-faire approach to online commerce and competition – if it instead signaled the beginning of a public policy debate considering the extent to which individuals should be empowered to re-establish ownership over their online identities.
Posted by: Michael_ONeil at November 20, 2007 12:41 AM
You are right to flag the Google-doubleclick Senate letter as significant.
For the first time official antitrust experts have declared Google dominant with "market power." They also defined the market as online advertising not overall advertising as Google hoped. My post has more insights on what all this means...
Posted by: scleland at November 20, 2007 10:12 AM
>>sent a strongly worded joint letter to ...
Oh, my God!!! Not a LETTER!!! I'm sure they're quaking int their boots ..... doing the Washington Two Step.... ;)
Post a comment
Thanks for signing in, . Now you can comment. (sign out)(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)
"Riveting" -San Francisco Chronicle
"Rewarding" -Financial Times
"Ominously prescient" -Kirkus Reviews
"Riveting stuff" -New York Post