News

Senate Panel Probes Google's Acquisition

• By The Associated Press
• September 28, 2007

Sen. Herb Kohl, D-Wis., chairman of an antitrust subcommittee, said at the outset of Thursday's hearing that the transaction "warrants close examination" by federal regulators. But afterward, he said there was "no clear winner" among the deal's supporters and opponents _ most notably Microsoft Corp.

While senators can't block the deal, they can express their concerns to antitrust regulators about combinations they oppose.

But Sen. Charles Schumer, D-N.Y., appeared satisfied with a Sept. 25 letter from Google that committed to take "important steps" to improve its privacy standards, and also promised that the combined company would increase its jobs in New York.

A lawyer for Microsoft, which sought to acquire DoubleClick Inc. but lost out to Google Inc., argued that the deal would enable Google to "become the overwhelmingly dominant pipeline for all forms of online advertising."

The purchase also raised privacy issues because it would give Google "sole control over the largest database of user information the world has ever known," Microsoft general counsel Brad Smith said.

Microsoft agreed earlier this year to pay $6 billion for Seattle-based online advertising firm aQuantive Inc. and Yahoo Inc. bought Right Media Inc. for $680 million.

Google's chief legal officer, David Drummond, said there was a "certain irony" to Microsoft's complaints. The software giant remains subject to the terms of a five-year antitrust settlement it reached with the U.S. government in 2002, and the company lost an appeal of a European Union antitrust case earlier this month.

The Federal Trade Commission is already reviewing whether the Google-DoubleClick combination would violate antitrust law. Consumer groups are pressing the agency to also scrutinize Google's privacy practices.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, told the Senate committee that Google should be required to strengthen its privacy practices as a condition of the acquisition.

Google is confident the FTC will approve the purchase, without conditions, Drummond said, and the company expects the deal to close by the end of the year.

Drummond reasoned that the transaction won't lessen competition because, unlike Google, DoubleClick doesn't sell advertising. Instead, it provides technology and services to companies seeking to place display ads online, he said.

"DoubleClick is to Google what FedEx or UPS is to Amazon.com," he said.

DoubleClick places and tracks online ads for its customers, and in the process collects data on consumer Web surfing habits. Google, the world's largest search engine, retains information on its users' searches.

Rotenberg said the data is vulnerable to hackers and other security breaches, and also to government demands.

The issue came up last year when Google successfully fought a U.S. Justice Department subpoena seeking a long list of search requests made by its users. The owners of three other major search engines -- Yahoo Inc., Microsoft and Time Warner Inc.'s AOL -- surrendered some of the information sought by the government.

Google paid two lobbying firms -- King & Spaulding LLP and the Podesta Group Inc. -- $320,000 in the first six months of 2007 to lobby the government on the DoubleClick acquisition and other issues.

Google's shares dropped 66 cents, or less than 1 percent, to $567.50.