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EU extends review of Google-DoubleClick merger

European Commission's decision to take a deeper look at the proposed merger potentially puts the $3.1 billion deal at risk.

European antitrust regulators will conduct a more extensive, second-phase review of Google's pending merger with DoubleClick, the EU announced Tuesday.

As part of the investigation, European regulators will delve in greater detail into whether a merger between search giant Google and online ad titan DoubleClick would harm competition. The regulators will determine whether to let the deal go through as is, let it pass with modifications, or veto the merger. The European Commission, the EU's antitrust watchdog, expects to make a final decision by April 2.

Google CEO Eric Schmidt said the company was "obviously disappointed" in the decision to extend review of the deal.

"We will continue to work with the Commission to demonstrate how our proposed acquisition will benefit publishers, advertisers, and consumers," Schmidt said in a statement. "We seek to avoid further delays that might put us at a disadvantage in competing fully against Microsoft, Yahoo, AOL, and others whose acquisitions in the highly competitive online advertising market have already been approved."

In making the decision to push the $3.1 billion deal into an extended investigation, the Commission cited concerns about the merger's impact on competition in the online advertising space--and potential subsequent harm to consumers--as the driving issue.

"The Commission's initial market investigation indicated that the proposed merger would raise competition concerns in the markets for intermediation and ad serving in online advertising," the European Commission's competition unit said in a statement.

The statement added that the decision to extend the review process "does not prejudge the final result of the investigation."

Over the past 10 years, the Commission has pushed only about 3 percent of its cases into a second-phase review. Of that group, the vast majority are allowed to go through either as the merger plans are originally stated or with some modifications, such as a divestiture of a division or subsidiary.

Last year, 356 cases came before the Commission in which it had to decide whether to approve the deal or move it into a second-phase review. Of that group, 13 cases--or 3.7 percent--were sent on to a second-phase review. The Commission required 6 of those deals to be altered in order to receive approval; 4 were allowed to move forward with no changes. The other 3 cases were pushed into 2007 for a decision.

Google, which announced its DoubleClick $3.1 billion merger agreement in April, is seeking to accelerate its display-ad business by offering a centralized system that gives advertisers and media companies the ability to manage their search and display-ad campaigns.

One competitor, Microsoft, has gone before Congress to testify against the deal, citing antitrust concerns. Redmond, which closed its $6 billion purchase of advertising company Aquantive in August, declined to comment on the EC's decision Tuesday.

Regulators with the U.S. Federal Trade Commission are also reviewing the deal, although their timetable is less clear. Early this month, Commissioner Jon Leibowitz said the agency is working "as expeditiously as possible given the complexity of the deal" and is focusing its analysis on the deal's competition, as opposed to privacy, repercussions.

Reassuring consumers
Consumer privacy advocates, both in the United States and in Europe, have sounded alarms about the deal. They argue that combining the two companies will consolidate too much personal information--for example, about individuals' search histories and Web surfing habits--in one company's hands. Google has maintained that user privacy would not be compromised by the deal.

Jeff Chester, executive director of the Center for Digital Democracy, which opposes the merger, applauded the EU's decision. He said European regulators should prohibit Google from making the buy--or at least subject the company and its "vast treasure trove of consumer data" to "meaningful safeguards."

"Consumers need to be assured that they won't be unfairly treated in terms of pricing and choice when buying online," he said in a statement. "Advertisers will need protections to ensure that online marketing remains both affordable and competitive, especially when using Google."

The Commission's statement did not mention privacy concerns as part of its investigation, only "whether the proposed transaction would significantly impede effective competition within the European Economic Area or any substantial part of it."

In recent years, the European Commission has become a key player in antitrust matters related to questions of monopolies and competition, antitrust attorneys say. Its recent success in its historic antitrust case against Microsoft is a prime example, they note.

The European Commission and U.S. antitrust regulators have generally been in step when it comes to evaluating mergers, say antitrust attorneys. One exception to that was General Electric's megamerger proposal to acquire Honeywell International in 2001.

U.S. antitrust regulators approved the deal, only to see it nixed by the European Commission. The deal needed approval from both sides of the Atlantic; otherwise, it would have been impossible for the merged entity to operate on a global basis. GE and Honeywell eventually withdrew their merger plans, marking the first time the Commission had blocked a merger between two U.S. companies. Google and DoubleClick are both based in the United States.