E.U. Probes Price Effects of Google, DoubleClick Deal

By Matthew Newman
Bloomberg News
Saturday, January 12, 2008

European Union antitrust regulators asked online advertising companies whether prices would rise if Google's proposed $3.1 billion takeover of DoubleClick is approved, according to an E.U. questionnaire.

The European Commission's antitrust probe is one of the last hurdles facing the proposed purchase. Google, owner of the most popular Internet search engine, is seeking to buy DoubleClick to bolster sales of Internet ads that include pictures and videos.

"If you currently use DoubleClick's ad serving technology, do you expect any changes in the service it offers (in price or quality) by DoubleClick after its acquisition by Google?" the commission asked in a seven-page questionnaire obtained by Bloomberg News.

The Nov. 26 questionnaire indicates the regulator's antitrust concerns about the transaction, which Google, based in Mountain View, Calif., announced in April. The commission asked companies that sell online ads what increase in price would prompt them to switch to services that compete with DoubleClick.

"The commission is definitely asking the right questions, and we know the answer from experience in the U.S.," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. "The ad exchanges have brought prices down. The effect of the exchanges is good for the advertising market."

The commission, the E.U.'s antitrust authority, started an in-depth investigation into Google's plans on Nov. 13, saying the purchase might hurt competition for online advertising dollars. The U.S. Federal Trade Commission approved the deal in a 4 to 1 vote on Dec. 20.

Ben Novick, a Google spokesman in London, said that the purchase would not harm competition.

"This is an ongoing investigation," Novick said in a telephone interview. "We hope the commission will come to the same conclusion as the FTC, who cleared the deal without any conditions."

The deal has been criticized by Microsoft, Yahoo and AT&T, which said it would hurt competition in the $28.8 billion global online advertising market. Privacy groups in the United States and Europe also oppose the deal. A European Parliament committee will hold a hearing Jan. 21 on privacy issues.

Google generates revenue from selling text-based ads that appear next to search results. DoubleClick's products help advertisers measure how effective their ads are and allow Web publishers to track and manage online advertising. The ads are typically display ads that include graphics or animation.

The companies that received the E.U. questionnaire act as intermediaries between Web sites and advertisers and use DoubleClick to place the ads on the sites.

An E.U. ruling is expected by April 2.

DoubleClick competes with aQuantive. Microsoft, the world's largest software maker, announced plans to buy aQuantive on May 18 for about $6 billion. Google has extended its lead over Yahoo and Microsoft in the Internet search market, capturing more than 60 percent of global queries.

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