• by Wendy Davis  @wendyndavis, November 14, 2007

The European Commission is extending its review of Google's proposed merger with DoubleClick due to concerns that the deal could harm competition in the online advertising industry.

"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 authorities said in a statement Tuesday. The Commission, which regulates antitrust issues for the European Union, has until April 2 to complete its investigation.

The European authorities appear especially concerned with Google's AdSense network, which serves contextual ads on other publishers' sites. In its statement, the Commission said it will focus on whether DoubleClick would have become "an effective competitor" with Google in that realm absent a merger.

The decision to extend the review shows the Commission has serious doubts about whether the merger meets antitrust standards, says antitrust lawyer Ted Henneberry, a partner in the London office of Heller Ehrman.

"You don't want to be in this position if you're Google," he says.

But, he adds, it's premature to view this move as signaling that European authorities intend to scuttle an acquisition. "It's not necessarily going to result, ultimately, in a finding against the deal," he says.

Google contends that it doesn't compete with DoubleClick in online advertising, but that the companies complement each other. Google argues that its core business is selling ads and that DoubleClick's is delivering them.

U.S. authorities are also investigating whether Google's planned buyout of DoubleClick raises antitrust issues and privacy concerns. The FTC is reviewing the deal and is expected to decide in the next few weeks whether to clear it or seek further information. The Senate held hearings about the deal's antitrust implications in September.

Furthermore, a dozen Republican members of Congress called last week for hearings into whether the deal will affect consumer privacy. They expressed concern that Google could combine information about consumers' searches with DoubleClick's data about the Web sites they visit to create detailed user profiles. "Google and DoubleClick would have one of the largest search query databases with one of the largest online user behavioral profile databases," the Congress members wrote in a letter to Rep. Bobby Rush, chairman of the House Subcommittee on Commerce, Trade and Consumer Protection. "The privacy implications of such a merger are enormous and without an in-depth examination, we and the American public will not fully understand what all of those implications may be."

U.S. consumer and privacy advocates including Electronic Privacy Information Center, the Center for Digital Democracy and U.S. Public Interest Research Group also oppose the merger.

Jeff Chester, executive director of the Center for Digital Democracy, cheered the news of the extended European investigation. "If we are to have a more democratic and diverse digital marketplace of ideas and commerce, there must be meaningful competition and consumer protection in the online ad sector," he said in a statement. He renewed a call for either a block on the merger or for new limits restricting Google's ability to harness DoubleClick's consumer data and business relationships.