Google Swallows DoubleClick

Article excerpt


Last Friday, a landmark acquisition unfolded in the fledgling online advertising industry. Google proposed to acquire DoubleClick Inc. for $3.1 billion. The acquisition should raise the eyebrows of the federal antitrust enforcement attorneys at the Federal Trade Commission (FTC) and the Justice Department.

The Act properly hovers over Google's proposed acquisition of DoubleClick, which might substantially lessen competition in online advertising or an online submarket. At a minimum, the acquisition gives the FTC the first real opportunity to closely analyze the dynamics of the increasingly important online advertising marketplace.

Serious scrutiny is critical because, as the U.S. Supreme Court has sermonized, antitrust rules are the nation's Magna Carta of economic liberty, the best instrument ever discovered for individual and collective prosperity. The laws focus on mergers or consolidations in growth industries like the Internet economy to make sure they do not inhibit new ways of doing business or the development of innovative products. In his landmark work "Capitalism, Socialism and Democracy," Joseph Schumpeter observed that the process of "Creative Destruction" is the keystone of national wealth, i.e., the wholesale displacement of old products and ways of doing business with new superior products and methods "which strikes not at the margins and outputs of existing firms but at their foundations and their very lives." Think of the way that the Internet has revolutionized news; the distribution of television and movies; telephone calling; retail shopping; travel planning; banking; investing; education; health care; and, virtually substituted for letter mail.

It's fair to say the Internet drives forward almost every facet of our economy. We must strive to protect that flow of Internet innovation. That is why the Clayton Antitrust Act generally forbids acquisitions "where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly."

Google controls the lion's share of the market for Internet-search text advertising and related contextual ads. DoubleClick would make it additionally dominant in serving graphical ads on Web sites on behalf of their publishers. Together, Google and DoubleClick are poised to possess a unique ability to combine each of these methods under one roof - potentially giving them an unparalleled competitive advantage in the online advertising marketplace. Advertisers and agencies use DoubleClick to deliver their ads to Web pages. Publishers rely on DoubleClick to insert ads when their site is visited. It has been estimated that the consolidation would leave Google with more than 80 percent of the advertisements served up to third-party Web sites when a user pulls up a page. …