US regulators on Thursday cleared a plan by Google to buy online advertising giant DoubleClick, a tie-up that has sparked concerns about privacy risks and still faces a challenge in the EU.
Federal Trade Commission members voted 4-1 to refrain from blocking the US$3.1 billion deal and said Google and DoubleClick "are not direct competitors in any relevant antitrust market."
The panel expressed concern about the privacy implications of the tie-up but said that could not be considered in its review.
"The FTC lacks the legal authority to block the transaction on grounds, or require conditions to this transaction, that do not relate to antitrust," the FTC said.
But the agency said it released a set of proposed marketing principles at the same time to address privacy.
"We will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly," the FTC said.
Commissioner Pamela Jones Harbour dissented and issued a separate statement expressing reservations, arguing that the deal "may substantially lessen competition."
She said the takeover "will affect the evolution of the entire online advertising market" as this evolves and has wide-ranging implications for consumers.
"The transaction will combine not only the two firms' products and services, but also their vast troves of data about consumer behavior on the Internet," she said.
European antitrust authorities are expected to rule on the deal sometime next year. The European Commission last month launched a probe and said the merger "would raise competition concerns."
Some US activist groups said the deal would pose privacy risks by giving the Internet giant unprecedented access to personal data.
"The FTC's strong support sends a clear message: This acquisition poses no risk to competition and will benefit consumers," said Eric Schmidt, Google's chairman and chief executive in a statement. "We hope that the European Commission will soon reach the same conclusion."
DoubleClick is one of the largest players in online advertising and uses various techniques to help companies target their ads to specific Internet users.
In a practice common in the industry, DoubleClick installs software bits referred to as "cookies" on Internet users' computers to track pages they view.
Google meanwhile stores its users' search terms in a way that can identify them through their Internet Protocol address.
Privacy advocates fear that Google and DoubleClick would be able to merge their expansive databases on people's Internet activities.
Scott Cleland, a technology analyst at the Precursor Group and critic of the tie-up, said the FTC used twisted logic to clear the deal.
"Under this gerrymandered and tortured market definition standard [they said] essentially no company is a direct competitor of any other company because on the Internet, all companies are unique complementary players that only `complement' one another but never `compete' with one another," Cleland said.
Cleland said Google controls 65 percent of the search market and DoubleClick 60 percent of the ad server market. He said this is the Internet equivalent of being the top 15 Wall Street banks and asset managers.
The deal has also drawn fire from Microsoft, which has had its own antitrust woes. A Microsoft attorney told lawmakers earlier this year that Google with DoubleClick would "become the overwhelmingly dominant pipeline for all forms of online advertising."
Ed Black of the Computer & Communications Industry Association lauded the FTC and said regulators should not stifle the tech sector.
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