Since posting two installments this morning on Google/DoubleClick, we have received additional info. What follows is our current understanding of the situation. None of this has been officially confirmed by any of the companies involved or the FTC. Two key points:
- The FTC has reportedly given Google/DoubleClick verbal assurances that it will not block the deal.
- Even if the the deal is approved, we believe Microsoft/AT&T could still litigate. This could severely delay or even prevent the transaction from taking place.
OUR UNDERSTANDING OF THE CURRENT SITUATION
The FTC is under tremendous political pressure on this transaction, in part driven by Microsoft’s highly organised, highly aggressive lobbying campaign. Among Microsoft’s alleged efforts:
- hiring a DC lobbying firm
- hiring PR firm Burson Marsteller
- funding the “analysis” written by the Brookings Institute arguing that Google’s legal case is weak,
- calls from Microsoft CEO Steve Ballmer to News Corp’s Peter Chernin and others to rally support,
- orders from Ballmer that other senior Microsoft employees make similar calls.
This lobbying, combined with fears about privacy and Google’s astounding global dominance, have helped Microsoft frame the concern as being about more than just economics. Specifically, Microsoft and its allies are now harping on privacy concerns in addition to the anti-trust issues…
The FTC, meanwhile, is supposed to base its decision about the deal based only on economics. The FTC has not yet formally made its decision, but the Google/DoubleClick side (“GoogleClick”) has received verbal assurance that the FTC will not block the deal.
Because of the intense political pressure, the FTC is going to extraordinary lengths to support its decision with documentary evidence and research. In the past few months, the FTC has presented GoogleClick with numerous written arguments made by Microsoft/AT&T, and GoogleClick has provided written rebuttals. The FTC has also interviewed hundreds of industry participants and observers. After largely completing this work, the FTC has reportedly given GoogleClick the unofficial thumbs-up.
Congress could try to force the FTC to reject the deal, but the only time this has happened recently–with Whole Foods–the decision was later overturned in court. GoogleClick assumes, therefore, that Congress will confine its protests to bellowing sound-bites and let the FTC make the call. The FTC decision should be announced within a couple of months.
If the FTC blocks the deal, GoogleClick could litigate to appeal the decision (as happened with Whole Foods). If the FTC approves the deal, meanwhile, Microsoft/AT&T might also be able to litigate to appeal the decision. Given Microsoft’s tenacious current efforts to block the deal, this reaction seems possible–especially because, every day the deal stays in purgatory is helpful for Microsoft.
If Microsoft can bog the deal down in court, it may have a chance of delaying it through the date at which either Google or DoubleClick can walk away (mid-2008–see here). It seems reasonable to assume, therefore, that even if the FTC approves the deal, Microsoft/AT&T could conceivably severely delay or even prevent it.