Privacy groups say Google-DoubleClick merger will hurt consumers

FTC accused of failing to meet obligations to the public

Google Inc.'s pending $3.1 billion acquisition of online ad-serving vendor DoubleClick Inc. will hurt consumers, according to two privacy groups opposed to the wholesale approval of the deal.

The responses came after the U.S. Federal Trade Commission voted 4-to-1 today to approve the deal, saying Google's proposed acquisition of DoubleClick is unlikely to substantially lessen competition.

In the wake of its decision, the FTC also proposed new principles to address important consumer privacy concerns associated with online behavioral advertising.

"[A] majority of the commissioners chose to ignore the privacy implications of the Google-DoubleClick merger and to propose instead the same self-regulatory approach to privacy protection that has repeatedly failed American consumers and could have been put forward whether or not a merger review was also under way," said Marc Rotenberg, executive director of the Electronic Privacy Information Center, in a statement.

Rotenberg said the FTC failed to protect the public's interest and its decision will have "far-reaching implications for the Internet economy and the privacy rights of American consumers."

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In a blog post, Jeff Chester, executive director of the Center for Digital Democracy, said the FTC sidestepped its responsibility by approving "the merger of two companies whose new, extended data-collection reach will give it unprecedented access to track our every move throughout the digital landscape."

"Despite the FTC's claims, privacy is most certainly an antitrust issue," Chester said in the blog. "A key component of the online market dominance that companies such as Google have achieved is the aggregation and analysis of consumer profiles, including the merger of far-flung data sets and vast data warehouses that only a handful of companies now have at their disposal."

Earlier this year, EPIC and the CDD petitioned the FTC to block the deal unless Google made significant changes to its privacy policy. The groups argued that the combined company will have unparalleled access to Web users' personal information.

The commission downplayed concerns brought by the two groups, saying privacy concerns are "not unique to Google and DoubleClick," and "extend to the entire online advertising marketplace."

Recently, EPIC and the CDD called on FTC Chairman Deborah Platt Majoras to recuse herself from the review of the deal because her husband is a lawyer at Jones Day, the Cleveland-based law firm that is advising DoubleClick on the merger. However, DoubleClick and the FTC said that Jones Day hasn't represented the company before the FTC, and Majoras declined to recuse herself from the review.

Rotenberg said EPIC and the CDD remain troubled by the role of Jones Day in the proceeding and said it should be investigated. When asked about the threatened legal action, Rotenberg said EPIC and the CDD are "pursuing the expedited Freedom of Information Act requests" they filed with the FTC asking for all documents relating to the connection between Jones Day and the Google-DoubleClick deal.

For its part Google said it remains committed to user privacy.

"For us, privacy does not begin or end with our purchase of DoubleClick," said Eric Schmidt, Google chairman and CEO, in a statement. "We have been protecting our users' privacy since our inception, and will continue to innovate in how we safeguard their information and maintain their trust."

Peter Swire, a professor of antitrust and privacy law at Ohio State University's Moritz College of Law, said the FTC missed its chance to explain more clearly how privacy fits into antitrust law.

"Privacy can be an antitrust issue in this way -- a merger can affect the quality of a product, for instance, if you search and there's no tracking, or if you search and there's a lot of tracking of what you've done, then the quality of that product has gone down," Swire said. And "traditional antitrust focus is to make sure there's competition on quality. So if we have that kind of effect on quality, then antitrust enforcement should kick in."

Google collects much less information about users' Web-surfing habits than DoubleClick, Swire explained. If the merger goes through, Google will be able to collect much deeper information on consumers who use its search engine. So for users who want to protect their privacy, the quality of the search product may be reduced because search previously was conducted without the combined deep and broad tracking that will be done after the merger, he said.

Although the merger jumped one major hurdle today, it still has another to face.

Today, European consumer groups warned the European Commission, which also has to approve the merger, that Google's plan to take over DoubleClick would erode consumers' privacy and would push up prices for online goods and services.

In a letter to Competition Commissioner Neelie Kroes, the BEUC, the pan-European Union consumer group, and three national associations urged the commission to use its powers to block the deal in its current form.

"Consumers' privacy could be at risk; it is crucial that the commission integrates privacy concerns into the Google-DoubleClick merger review process," said Monique Goyens, BEUC's director general, in a statement.

In addition to privacy concerns, the letter argued that the combined strength of the two Internet companies would harm consumers "with respect to the price, degree of innovation, quality and selection of online products and services that would likely be available to consumers following the merger."

Neither Google nor the commission was available for further comment.

The EC's competition department has until April 2 to approve the deal, approve it on the condition it is changed, or prohibit it outright.

One group in favor of the merger is the Washington-based Competitive Enterprise Institute (CEI), which describes itself as a nonprofit public policy group dedicated to the principles of free enterprise and limited government. "While the controversy seems complex, it is really quite simple," said Cord Blomquist, technology policy analyst at the CEI, in an e-mail. "The merger is efficient, it helps fledgling Web sites with ad revenues, and it benefits investors and consumers. Google teaming up with DoubleClick is a win-win for everyone involved." He said consumers will enjoy more relevant and informative ads while Web sites will be able to generate more content because of the additional ad revenue. Blomquist said there are no concrete legal reasons to oppose the deal. He said the acquisition will make the market more competitive by allowing Google to compete with Yahoo in image-based advertising. A spokeswoman for the U.S. House of Representative's Energy and Commerce Committee, which last week sent a letter to Google with 24 questions it wanted answered about the merger, said the committee had no comment on the FTC's decision. Grant Gross and Paul Meller of the IDG News Service contributed to this report. For more on the privacy issues raised by the Google-DoubleClick deal, see this interview with Marc Rotenberg, executive director of Electronic Privacy Information Center.

Copyright © 2007 IDG Communications, Inc.

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