In an ironic twist, Microsoft general counsel Brad Smith testified before the Senate Judiciary Committee yesterday in opposition to the proposed merger between Internet titan Google and online advertising giant DoubleClick. The proposed deal is facing antitrust scrutiny as competition heats up in the Internet advertising arena. While acknowledging the industry is very fluid with companies like Yahoo, AOL, and even Microsoft (which just paid over $6 billion for aQuantive) making large moves in recent months, Smith still told the Committee that Google’s acquisition of DoubleClick poses "an imminent risk of giving a single company the degree of market power that could foreclose competition."
The concern is that if a single player were to become dominant in the online marketing world, it could set arbitrary prices for online advertising without fear of being meaningfully undercut by competition: advertisers would have no choice but to pay whatever exhorbitant rate the market leader demanded, or (essentially) no one would see their ads. A study just published by the AEI-Brookings Joint Center on Regulatory Studies—and partially funded by Microsoft and AT&T—suggests a combined Google/DoubleClick would do so. The report’s authors, Robert Hahn and Hal Singer, conclude: "A combined Google-DoubleClick would have greater incentive to increase the price of DoubleClick’s advertiser tools relative to a standalone DoubleClick."
Smith also speculated that a Google/DoubleClick merger could have negative impacts on Internet users’ privacy, especially of Google and DoubleClick were to pool their respective databases of user demographics and behaviors.
Microsoft and—by proxy—AT&T citing antitrust concerns before a Senate Committee is ironic, since both companies have been found to have abused monopoly power in their markets.
Google downplayed concerns over the merger, and promise to address privacy issues by enabling users to opt out of usage and behavioral tracking. In a letter read by Senator Charles Schumer (D-NY), Google CEO Eric Schmidt said Google was exploring the idea of enabling users to disable Google’s tracking cookies.
Google also believes the acquisition does not raise any antitrust concerns, arguing on its public policy blog that Google’s and DoubleClick’s businesses are complementary rather than competitive, since DoubleClick is primarily an advertising distributor and does not buy or sell ads or advertising space.