and Joseph Menn
WASHINGTON — In approving Google Inc.'s $3.1 billion purchase of DoubleClick Inc. on Thursday, federal regulators determined that there was plenty of competition in the fast-growing Internet ad world.
But they also expressed concerns about consumer privacy in that rapidly evolving marketplace, where companies are increasingly using technology to track people's digital footprints in order to follow them around the Web and target ads to their activities.
The Federal Trade Commission voted 4-1 to allow the deal, announced in April, without any conditions, arguing that the two companies were not focused on the same parts of a Web advertising market that's expected to generate $28 billion in revenue next year. Google still needs approval from the European Union to complete the acquisition.
Google competitors, particularly Microsoft Corp., had lobbied hard against the deal, complaining that adding DoubleClick's online advertising technology and customer base would give the search giant an insurmountable lead in Internet advertising.
The FTC dismissed those concerns, as well as requests by privacy groups that it block the deal or enact restrictions to protect consumer data.
"Not only does the commission lack legal authority to require conditions to this merger that do not relate to antitrust, regulating the privacy requirements of just one company could itself pose a serious detriment to competition in this vast and rapidly evolving industry," the FTC majority said in a statement.
Commissioner Pamela Jones Harbour dissented, saying the FTC should have addressed the significant privacy and competition concerns.
"The truth is, we really do not know what Google/DoubleClick can or will do with its trove of information about consumers' Internet habits," she wrote in her dissent. "The merger creates a firm with vast knowledge of consumer preferences, subject to very little accountability."
Although the commission approved the deal, its members were concerned enough about the advertising practice known as behavioral targeting that they released a set of proposed privacy guidelines for the industry.
Consumer advocates offered modest praise for the move.
"The FTC recognized that behavioral advertising poses a menace to consumer privacy and that the business model may be inherently unfair," said Ed Mierzwinski, federal consumer program director at U.S. PIRG.
But the FTC's actions weren't enough for some privacy groups, who fear the ramifications of adding DoubleClick's data to the storehouse of information that Google collects from its search engine and advertising programs. Those groups hope that more consumer-friendly regulators in Europe will enact restrictions, which some analysts said was possible.
The European Commission is expected to rule on the merger by April 2.
Privacy advocates took solace that the deal had raised public awareness of behavioral advertising.
"Google/DoubleClick has ironically made visible a vast, largely secret apparatus designed to collect vast amounts of personal information about everyone online," said Jeff Chester, executive director of the Center for Digital Democracy.
Google, based in Mountain View, Calif., dominates the market for targeted text-based ads, both those linked to the results on its hugely popular search engine and those delivered to other Web sites. New York-based DoubleClick is a leading provider of technology for delivering large display ads on Web sites and tracking who views them.
Google has said it is committed to preserving privacy and has promised to uphold the existing contracts DoubleClick has with its clients that limit how it can use customer data.
"The FTC's strong support sends a clear message: This acquisition poses no risk to competition and will benefit consumers," Google Chief Executive Eric Schmidt said in a statement.
The FTC said Google and DoubleClick provided different advertising services and do not compete directly. The commission cited acquisitions this year by Microsoft, Yahoo Inc., and AOL as evidence that the online ad market was evolving and "at most, moderately concentrated."
Just Wednesday, Viacom Inc. announced a five-year, $500 million deal with Microsoft to replace DoubleClick as the provider of ads to its network of Web sites.
The FTC noted that Microsoft, Yahoo and Time Warner "have access to their own unique data stores" of online advertising information and that the companies "appear to be well-positioned to compete vigorously against Google in this new marketplace."
"At bottom, the concerns raised by Google's competitors . . . really amount to a fear that the transaction will lead to Google offering a superior product to its customers," the FTC said.
Consumer privacy suffers from Internet marketplace
and Joseph Menn