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Google DoubleClick deal: EU ramps up scrutiny
No decision on merger til next year...

By Dawn Kawamoto and Anne Broache

Published: Wednesday 14 November 2007

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

Regulators will look in greater detail into whether a merger between search giant Google and online ad titan DoubleClick will 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 2 April 2008.

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

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Schmidt said in a statement: "We will continue to work with the Commission to demonstrate how our proposed acquisition will benefit publishers, advertisers and consumers. 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 $3.1bn 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 European Commission's competition unit said in a statement: "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 statement added 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 three per cent 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 (3.7 per cent) were sent on to a second-phase review. The Commission required six of those deals to be altered in order to receive approval and four were allowed to move forward with no changes. The other three cases were pushed into 2007 for a decision.

Google, which announced its DoubleClick $3.1bn merger agreement in April, is seeking to accelerate its display-ad business by offering a centralised 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 $6bn purchase of advertising company aQuantive in August, declined to comment on the EC's decision.

Regulators with the US 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.

Dawn Kawamoto and Anne Broache write for CNET News.com