September 26, 2007 8:45 PM PDT

Microsoft, Google square off in Washington

Google and Microsoft's bitter and long-standing rivalry in the Internet search and advertising markets is spilling over into Washington.

Senior executives from both companies are scheduled to show up before a U.S. Senate panel on Thursday afternoon to argue their respective cases for why Google should--or should not--be allowed to purchase DoubleClick for $3.1 billion. The acquisition was announced in April but is still undergoing a review by the Federal Trade Commission and by regulators in Europe and Australia.

The hearing could mark a turning point in Google's relationship with Washington. It is the first time that Congress has seriously scrutinized the fast-growing company's business strategies, and the first time that a proposed acquisition by the company has encountered such concerted political opposition.

It also represents the result of months of private lobbying and public agitation against the merger by Google's most dangerous business rivals. No stranger to antitrust issues, Microsoft has ordered its legendary army of lobbyists to torpedo the deal, and AT&T, Yahoo and Time Warner have also expressed concerns.

During Thursday's hearing, Google is planning to stress the differences between text-based advertising (its specialty, of course) and graphical display ads (DoubleClick's forte). A second argument is that the companies participate in different parts of the advertising sales and delivery process and are therefore complementary.

"Our purchase of DoubleClick does not raise antitrust issues because of one simple fact: Google and DoubleClick are complementary businesses, and do not compete with each other," Google Vice President David Drummond is expected to tell the panel, according to prepared remarks seen by CNET News.com. "DoubleClick is to Google what FedEx or UPS is to Amazon.com. Our current business involves primarily the selling of text-based ads--books in our analogy. By contrast, DoubleClick's business at its core is to deliver and report on display ads."

Drummond is stressing the difference because it matters to the Federal Trade Commission lawyers and economists who are reviewing the deal. If they eventually determine that Google and DoubleClick are in different enough lines of business, and their products are therefore not substitutes for one another, the purchase will receive less scrutiny.

Ever since the early 1980s, the FTC and Justice Department have tried to evaluate whether a proposed merger will unreasonably create or enhance market power by evaluating whether the merger will increase how concentrated the market is, whether it will have adverse competitive effects, and whether there is a presence--or absence--of serious competitors.

To make their arguments about market power, Microsoft and Google have hired not just lobbyists, but economists too. Stanford University economics professor Robert Hall has represented Google at public events, supplementing lobbyists in the Washington office of the law firm Brownstein Hyatt & Farber (including Makan Delrahim, a former top Justice Department antitrust official).

Microsoft and AT&T fired back with their own economists on the eve of the Senate hearing. A paper written by Robert Hahn and Hal Singer and released Wednesday says: "Google's proposed acquisition of DoubleClick would enhance Google's market power in the market for search and publisher-based advertising tools."

It also suggests that a mathematical calculation of the concentration of the market would be above the federal government's warning level. "The implication of such a finding is that a combined Google-DoubleClick would likely have an incentive to increase the price of DoubleClick's offering relative to a stand-alone DoubleClick, thereby harming online advertisers," the paper says.

CONTINUED: Political sleight of hand…
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19 comments

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Cn Yu Spell "Microsoft"?
Looks like the editors have fallen asleep at the wheel again... Micrsft?
Posted by GraffixDesigner (10 comments )
Reply Link Flag
thanks
Well, obviously we can't. Or, more precisely, we make typos too. Thanks for the catch.
Posted by declan00 (848 comments )
Link Flag
That is a blatantly false analogy
[i]"DoubleClick is to Google what FedEx or UPS is to Amazon.com. Our current business involves primarily the selling of text-based ads--books in our analogy. By contrast, DoubleClick's business at its core is to deliver and report on display ads."[/i]

Text, or Graphic, its all advertising and alot of people would not necessarily see the distinction.

Only an idiot would confuse a retailer with a parcel delivery service.
Posted by NickH (127 comments )
Reply Link Flag
Ummm
I think what they trying to say is that Double-Click will enhance the service Google offers, just like FedEx enchance Amazon's product by offering the delivery service.

I don't think people in general has any love for advertisements, whether printed or online, and I find it extremely distrubing that MS of all companies are complaining, since their track record regarding competition isn't the best.

The bottom line is that some major corp is standing to loose a lot of money hence the opposition to the merger.

They might be fighting the right war, but for all the wrong reasons. Since when did any major corp gave a @#$%^ about how much people pay for any product.
Posted by Meerkat71 (45 comments )
Link Flag
2 trick pony
MS is a 2 trick pony. Desktop and server.
So what's the problem if Google had text ads and banners?
Posted by t8 (3716 comments )
Link Flag
Scummier and Scummiest
Microsoft would sell your mother's kidneys, if they weren't hungry themselves. We all know that. Google makes noises about being not evil but is ready to buy a company that is synonymous with cackling fiendishness. It will only be a matter of time that MSFT will be remembered as The Good Corporate Citizen when Google is facing charges of extortion, blackmail, privacy violations and criminal data brokerage. Buying Double-Click is the big graduation ceremony from the pop-tart-munching level of evil to the Jeffrey Dahmer stage of wanton cannibal debauchery.
Posted by Sumatra-Bosch (526 comments )
Reply Link Flag
MS better be careful
After all, they just severely overpaid for Aquantive.

The noise they are making could bite them in their huge ass.
Posted by The_Decider (3097 comments )
Reply Link Flag
Not really
Microsoft has very little market share compared to Google, even with the aQuanitive purchase.
Posted by tom.cat (14 comments )
Link Flag
Google should be prohibited from this acquisition
Google, Inc. is presently involved in a case regarding You Tube which is expected to be announced around year end. In this separate case, Google, Inc utilized their Targeting to adversely effect an individual who submitted the business model for You Tube to Google, Inc. Google, Inc Targeted the Individual as a Terror Suspect, significantly destroying his family and effectively rendering him non-existant to Law Enforcement, endangering the lives of his family.

This was personally handled by Managing Principals of Google, Inc. who did not like his critisism of Intelligence Oversight Policy and Google Management.

Until existing Management is removed from Google, Inc. They should be prohibited from any Acquisitions on the basis of the Security Risk they caused the US Government and Violation of Laws regarding the handling of CLASSIFIED - TOP SECRET information and violation of multiple Security Clearances at the company.

Google, inc is unsuited to new acquisitions at this time.

Sincerely,


James Reginald Harris, Jr. INVENTOR
Posted by gurfrip (23 comments )
Reply Link Flag
Google should be able to buy
IS MS can buy an online Ad company I don't see why Google or anyone for that matter can't buy one as long as the financials are there.

Lets not forget that Microsoft are the ones who were found guilty of being a monopoly and then ***** slapped and basically they go off easy.

I don't remember GOogle ever being found of the same thing.
Posted by RompStar_420 (772 comments )
Link Flag
Market Share?
Market Share? Microsoft seriously expects people will consider this argument from them? What is their share of the Operating System market? Browsers? Spreadsheets? Word Processors? Didn't they back Darl McBride and SCO? Talk about chutzpah!
Posted by Wat Tyler (3 comments )
Reply Link Flag
Ummmm, yeah
"Market Share? Microsoft seriously expects people will consider this argument from them?"


Ummmmm. Yeah. People should. Because in this case, MS is actually right: Having Google own the entire online advertising market by acquisition isn't a good thing, because it drives up the cost of advertising and that makes goods/services more expensive for all of us.
Posted by tom.cat (14 comments )
Link Flag
Google??
I never like Google toolbar cuz it never tells me what block they did on toolbar. It should be out of that.. Microsoft does real good. Google just like to abuse and sells our emails to other junk businesses. DUMP GOOGLE OUT
Posted by wildlife lover (10 comments )
Reply Link Flag
Goooo Goooogle!
Google have worked long and hard with their online advertising services. They provide a very effective and efficient service, and I think they deserve the right to grow this part of their business.

On the other hand, Microsoft are simply driven by profit. No heart, no passion, just 1 goal - revenue. They don't innovate, they imitate. It’s a lot easier for them to buy into established markets, then to try and create and set new standards, which is what Google have done and why they deserve it over Microsoft.

Keep up the great work Google, thanks.
Posted by Neville Bartos (34 comments )
Reply Link Flag
The Consume Should Win
This google deal is not what's best for consumers.
Meanwhile, the regulars should agree with Microsoft and strip Microsoft of it's internet advertising division as well.
Posted by Renegade Knight (13748 comments )
Reply Link Flag
Good Points
Microsoft has 90% of the market and should not be dictating anything. Google will have 80% of the market and should not be allowed to become what Microsoft became AND had to be regulated.

Using your example neither Microsoft or Google should have a say in this.

I agree that Microsoft was found to be a monopoly in court and had controls put into place. What needs to happen now is to work proactively with Google (remember you said they played well with the IT community) to get the controls in place for their business so that the playing field is level.
Posted by flyguybob (2 comments )
Reply Link Flag
Microsoft making accusations. hmmph
Well it's a well known fact MS don't have a problem knocking out other business's completly.

Was it not ballmer who recently said were going to kill them (GOOGLE) in a fit of rage that involved chair throwing of some kind. that still makes me laugh.

Tough S**T MS you buy an advert biz they buy an advert biz, so what that it might gain them more market share was that not your intent buying Aquantive. Oh and ballmers kill them statement points a similar picture.

Sounds like the bully crying in the corner with a bleeding nose to mommy after every one finds out he's not that tough it's all talk, threats and FUD when that one little kid finally stands up to the Mighty MS Bully Machine.

Way to go GOOGLE.
Posted by ripntime (7 comments )
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