Google wins Commission approval, closes DoubleClick deal

The European Commission has more stringent competition rules than US authorities but it has said that the merger is permissible because Google and DoubleClick are not direct competitors and there is enough competition in the market for online advertising services.

Google confirmed that the deal has now been completed.

"The Commission's in-depth market investigation found that Google and DoubleClick were not exerting major competitive constraints on each other's activities and could, therefore, not be considered as competitors at the moment," said the Commission.

"Even if DoubleClick could become an effective competitor in online intermediation services, it is likely that other competitors would continue to exert sufficient competitive pressure after the merger," it said. "The Commission therefore concluded that the elimination of DoubleClick as a potential competitor would not have an adverse impact on competition in the online intermediation advertising services market."

Google's announcement of the completion of the deal was almost immediate. "We are thrilled that our acquisition of DoubleClick has closed," said Eric Schmidt, Google's chief executive. "With DoubleClick, Google now has the leading display ad platform, which will enable us to rapidly bring to market advances in technology and infrastructure that will dramatically improve the effectiveness, measurability and performance of digital media for publishers, advertisers and agencies, while improving the relevance of advertising for users."

The Commission had been conducting an investigation sine November last year into whether DoubleClick's share of the market for serving display ads on websites and Google's dominance in keyword advertising meant that the deal would stifle competition.

Microsoft had opposed the deal, claiming that it would create too powerful an entity in the online advertising market. "This proposed acquisition raises serious competition and privacy concerns," the company's general counsel Brad Smith told Reuters last year. "We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market."

The Commission, though, said that the existence of Microsoft was one of the reasons that the merger passed its tests.

"The Commission found that the merged entity would not have the ability to engage in strategies aimed at marginalising Google's competitors, mainly because of the presence of credible ad serving alternatives to which customers can switch, in particular vertically integrated companies such as Microsoft, Yahoo! and AOL," said the Commission. "The market investigation also found that the merged entity would not have the incentive to close off access for competitors in the ad serving market, mainly because such strategies would be unlikely to be profitable."

Google agreed to buy DoubleClick in April 2007 for $3.1 billion, reportedly outbidding Microsoft for control of the company.

The Commission pointed out that its investigation was purely one of economic competition and did not take account of the potential privacy implications of the deal. Privacy advocates are worried that the merged company will have a huge store of web users' surfing habits.

The deal has been opposed by some privacy officials. The Data Protection Commissioner of the German state of Shleswig-Holstein Thilo Weichert wrote to the Commission last October, expressing his view that the merger would allow the two halves of the combined company to merge their databases in contravention of EU privacy law.

The collective body of Europe's data protection officials, the Article 29 Working Party, is expected to report next month on the results of its investigation into the privacy practices of search engine companies.