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Saturday, September 29, 2007

Google Acquisition

A Senate hearing on antitrust concerns about the proposed merger between Google and DoubleClick occasionally turned tense yesterday, as Microsoft and Google brought their corporate rivalry to Capitol Hill.

The hearing was prompted by worries that the $3.1 billion merger would create a behemoth in the online advertising business, potentially risking consumer privacy and stifling competition.

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Google and DoubleClick respectively dominate search and image advertising on the Web. A combined company would help create ads targeted at consumers' interests while preserving Web users' privacy, Google said.

Microsoft, which is trying to get a bigger foothold in that growing business, is lobbying against regulatory approval of the merger, saying it would consolidate too much of the market. Microsoft also said the merger could put consumer privacy at risk by consolidating information about what people do on the Web in the hands of a single powerful company.

The hearing, hosted by the Senate Judiciary subcommittee on antitrust, became more antagonistic after a series of claims and counterclaims about Google's competitive intentions.

Microsoft General Counsel Brad Smith accused Google of unfairly cornering the market and placing consumer data at risk of security breaches, and then told the senators that he and Google General Counsel David Drummond were "friends off the basketball court."

Drummond seemed to bristle at that comment, saying he didn't know what Smith meant with the sports reference, and then moved on with his rebuttal.

The Federal Trade Commission and the European Commission are reviewing the Google-DoubleClick deal. Although Congress has no authority to block the completion of a deal, lawmakers could decide that additional laws are necessary to protect online consumer privacy. In a letter to the FTC in July, Rep. Bobby Rush (D-Ill.), chairman of the House Energy and Commerce subcommittee on commerce, trade and consumer protection, said he hopes to hold a hearing on the issue.

"No one concerned with antitrust policy should stand idly by if industry consolidation jeopardizes the vital privacy interests of our citizens so essential to our democracy," said Sen. Herb Kohl (D-Wisc.), chairman of the antitrust subcommittee.

The Google-DoubleClick deal is only one of a rash of acquisitions announced in recent months. Microsoft announced plans in May to acquire aQuantive, DoubleClick's less powerful competitor.

Drummond argued that Google has been at the forefront of privacy efforts, noting that it was the first search engine to make search records anonymous after a period of time. He also said it is in the company's best interest to protect consumers' privacy because it needs to maintain users' trust.

Some agreed with Google's argument that targeted advertising benefits consumers.

"The evidence is that the use of personal information by online advertisers produces substantial consumer benefits," Thomas Lenard, a senior fellow at the Progress and Freedom Foundation, said at the hearing. Google and Microsoft are among the companies that support the foundation.

But Alissa Cooper, a policy analyst at the Center for Democracy and Technology, said the deal points to the need for greater consumer protections. "If they thought this merger pointed to a larger, industry-wide problem, Congress could create those now," she said in an interview.

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