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More scrutiny for Google-DoubleClick merger

More scrutiny for Google-DoubleClick merger

It might seem like Google can't be stopped, but that doesn't stop 'em from trying.

The two consumer-advocacy groups that filed a petition with the Federal Trade Commission (FTC) demanding that the chairman to recuse herself from the investigation of the Google-DoubleClick merger are unsatisfied with the regulatory agency's response.

They are now calling for a full inquiry into the relationship between DoubleClick and the global law firm Jones Day, which it has retained to advise it on the antitrust and competition laws relating to the merger.

The original complaint, issued Wednesday by the Center for Digital Democracy (CDD) and the Electronic Privacy Information Center (EPIC), insists on Chairman Deborah Platt Majoras' recusal because her husband is an antirust lawyer for Jones Day.

Further, Chairman Majoras herself used to be a partner at Jones Day, and has recused herself from past antirust reviews because one of the companies under review was being advised by Jones Day, the petition claims.

The petition cites text that the groups took from Jones Day's Web site, stating that the firm is advising DoubleClick on the "international and U.S. antitrust and competitive aspects" of the $3.1 billion merger.

Nancy Judy, the FTC's director of public affairs, told InternetNews.com Jones Day is actually only advising DoubleClick on the EC's investigation of the acquisition. "Jones Day has not appeared before the Commission," she said, referring to the U.S. regulatory body.

Judy said that the FTC had only learned on Tuesday that Jones Day was representing DoubleClick in Europe, and that Chairman Majoras was working quickly to prepare a response to the petition.

"The chairman is reviewing the petition with our chief ethics officer, [Christian White]," she said, adding that a response could be expected as early as Thursday afternoon.

The CDD and EPIC are now questioning the FTC's claims that it only recently learned that Jones Day was representing DoubleClick, and that it is not involved in the FTC proceedings at all. The two groups said Thursday afternoon that they are planning to file a Freedom of Information Act request with the FTC to turn over all records about Jones Day's involvement with the merger.

In a joint response the two groups sent to InternetNews.com, they claim that Jones Day has removed information from its Web site describing the nature of its work for DoubleClick.

Careful not to overstate their case, the groups say that among the conclusions that "one could draw from these additional facts" is that "Jones Day has sought to conceal the nature, scope and duration of the relationship with its client DoubleClick by altering Web pages on the firm's site."

They also suggest the possibility that the FTC might have either been "misinformed of willfully misled the public" in stating that Jones Day did not appear before the Commission representing DoubleClick.

DoubleClick said that Simpson Thacher is its primary outside counsel retained to advise it on all matters relating to the merger, including antitrust considerations.

"Jones Day has been engaged primarily with respect to European and other non-U.S. jurisdictions," a spokesman for DoubleClick wrote in an e-mail to InternetNews.com.

"Jones Day was not engaged to represent, and has not represented DoubleClick before the Federal Trade Commission or appeared before the Commission on DoubleClick’s behalf."

Jones Day did not respond to repeated requests for comment.

The Washington, D.C., research and analysis firm Stifel Nicolaus suggests that even if Chairman Majoras were to recuse herself from the review, the FTC would still likely approve the merger.

Majoras would likely vote to approve the merger, which would result in 3-2 vote among the five-person commission greenlighting the deal.

The FTC requires a majority vote to block a merger, so even without Majoras' approving vote, the commissioners would be tied 2-2 and the deal would still be approved, Stifel has concluded.

Interestingly, another commissioner, Adam Kovacic, is also married to a partner at Jones Day. The petition does not call for Kovacic to recuse himself. CDD Executive Director Jeff Chester explained to InternetNews.com that the groups were aware that Kovacic was married to a Jones Day partner, but that their petition focuses on Majoras because of her unique role as chairman.

The FTC's Judy also pointed out that the petition incorrectly identifies John Majoras as an equity partner at Jones Day. Majoras had been an equity partner, but voluntarily changed his status to general partner on January 1, 2006.

That he is no longer a stakeholder in the firm will likely be an important part of any rebuttal the FTC makes challenging the petition.

Stifel has concluded that the merger is likely to clear regardless of the action that the petition elicits. The tougher fight for Google and DoubleClick will be in Europe, where the EC could take to heart a strongly worded objection from dissenting commissioners.

Last month, the EC announced that it was sending its investigation of the merger into the more rigorous "phase-two" review.

Both regulatory bodies are examining the potential anti-competitive effects the merger could have on the online advertising industry. Google and DoubleClick both trade in online advertising, but they employ different business models.

Google's algorithm-based AdSense serves up clickable links based on search queries, while DoubleClick places banner ads on Web sites.


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