Google’s proposed purchase of mobile advertising platform AdMob now faces political heat.
Sen. Herb Kohl (D-Wis.) wrote a letter Tuesday to his former staff counsel, Federal Trade Commission Chairman Jon Leibowitz, urging the agency to “carefully” review the merger, which would combine Google’s growing presence in mobile advertising with the largest company that places ads on smart phones.
Leibowitz worked for Kohl from 1989-2000, including a stint as the Democratic staff director on the Senate Judiciary Committee’s antitrust subcommittee when Kohl was the ranking Democrat on the panel. Kohl now chairs that subcommittee.
“Without reaching any conclusion as to whether the Google/AdMob transaction would create such dominance or would cause any substantial harm to competition, I believe it is essential that the FTC scrutinize this deal very closely,” Kohl wrote.
Critics of the deal have complained Google could use its muscle in the online search market to become the dominant player in mobile advertising.
Google has responded that the market has a dozen players, is still developing and is too new for the deal to raise major regulatory issues.
“While we’re continuing to work with the FTC, there is overwhelming evidence that mobile advertising will remain competitive after this deal closes,” Google spokesman Adam Kovacevich said in a statement. “Mobile app advertising is less than two years old, there are more than a dozen mobile ad networks, app developers and advertisers routinely use multiple networks”.
Apple, he pointed out, is also getting into mobile advertising.
The FTC has reportedly asked some parties to sign sworn statements, indicating it has some concerns about the deal.
The review is important, Kohl said, because of the role mobile phones will play in the future. ”Smart phones are a uniquely powerful method for advertisers to reach consumers, because most consumers with smart phones carry them most of the day, and frequently use them to access and search the Internet,” Kohl said.
More Internet searches will be conducted on a smart phone than on the computer in the next five to 10 years, and the smart phone will become a dominant advertising medium, Kohl said, citing industry experts.
“Allowing any one firm to dominate this market could result in higher prices for mobile advertising on the Internet and with respect to smart phone applications, and also could result in lower revenues realized by applications developers,” Kohl said.
Kohl, who chairs the Senate Judiciary Committee’s antitrust subcommittee, also asked the FTC to assess the privacy concerns raised by combining the vast data troves of both companies. “The FTC should assure itself that the deal, if approved, will have sufficient safeguards to protect consumers’ privacy,” Kohl said.
While the agency also handles privacy issues as a function of its consumer protection mandate, it does not usually take privacy into account when reviewing a merger.
Kohl raised similar concerns about Google’s 2007 purchase of online ad platform DoubleClick. The FTC approved that deal without conditions.
Updated at 3:15 to include comment from Google.
The White House included in the new health care plan it unveiled today a proposal that the Federal Trade Commission has long championed: a ban on payments from brand-name drug manufacturers to keep competing drugs off the market.
Pharmaceutical companies sometimes pay rivals who make generic versions of their drugs to keep those cheaper versions off the market for months or even years longer than they would otherwise — pay-for-delay, it has been called. The FTC has long argued that such payments violate competition laws, but courts have had mixed reactions.
Last July, the Justice Department’s Antitrust Division reversed the previous administration’s stance and sided with the FTC on the issue.
FTC Chairman Jon Leibowitz, who has aggressively championed the cause, said he was “delighted” the provision was included in the latest White House health proposal. “When drug companies agree not to compete, consumers lose,” he said in a statement. “Ending pay-for-delay settlements will help control drug costs.”
In a recent study, the FTC found that the payments protect “at least” $20 billion in pharmaceutical sales, and would cost American consumers around $35 billion over the next 10 years.
Today President Obama proposed that such payments should be illegal unless the pharmaceutical companies can show with “clear and convincing evidence” that the deal has pro-competitive benefits that outweigh its negative effects.
A similar provision was included in the House version of the health care overhaul package last year. In the Senate, the chairman of the Senate Judiciary panel’s Antitrust Subcommittee, Democrat Herbert Kohl of Wisconsin, introduced legislation that would ban the payments. It was not included in the final version of the health bill the Senate passed, but the stand-alone bill is still on the Senate floor calendar.
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The Federal Trade Commission has rejected a bid by Intel Corporation to have Commissioner J. Thomas Rosch disqualified from reviewing the agency’s case against the chip maker on the grounds that he had served as Intel’s primary antitrust counsel in the late 1980s and early 1990s.
In an order on the FTC’’s Web site which was first reported in the Wall Street Journal, Chairman Jon Leibowitz said Intel spent “many months” trying to convince Rosch to vote against bringing the case against Intel without mentioning the potential conflict of interest.
Intel argued that Rosch should recuse himself on the case because he represented Intel during a previous investigation into the company that the FTC opened in 1991. Before coming to the FTC in 2006, Rosch was a partner at the law firm Latham & Watkins in San Francisco.
The FTC filed an administrative law suit against Intel last Dec. 16, accusing the company of using its dominance in the microprocessor market to illegally induce its customers to spurn competing products.
The ”matters upon which Commissioner Rosch previously advised Intel are so distant in time—and concern technology, allegations, and business relationships that are so dissimilar to those relevant to the present matter,” Leibowitz said.
Another commissioner, William Kovacic is recused on the case because his wife’s law firm represents Nvidia, an Intel competitor that has lobbied the FTC to file suit against the chip giant.
In a separate statement, Rosch said he spent hundreds of hours considering the case and met with Intel officials three times, including a Dec. 3 meeting wherein he told Intel’s general counsel he had “tentatively formed a “reason to believe” that a complaint should issue,” without the company mentioning it might want him recused from the review.
Intel filed its motion to have Rosch disqualified hours before the Commission voted to file suit against the company.
Intel’s general counsel, A. Douglas Melamed spoke to Chairman Leibowitz several hours before Intel sought the recusal, Rosch said, without mentioning the motion.
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Google’s antitrust lawyers got some good news today, when word broke that Apple Inc. is buying mobile advertising company Quattro Wireless.
Apple’s entry into the mobile advertising market comes two months after Google’s $750 million bid for rival mobile advertising platform AdMob. Critics of the deal have said it would substantially decrease competition in the nascent mobile advertising market and put Google on the path to having a monopoly in that industry.
The entry of another large rival into the field could help Google’s claim that the deal does not raise antitrust concerns.
In a post on it’s public policy blog today, Google product manager Paul Feng argued that Apple’s purchase of Quattro proved that mobile advertising is a competitive industry.
“[W]ith more investments and acquisitions in the space, including from established players like Apple and Google, that’s a sign that vigorous growth and competition will continue,” Feng writes.
The Federal Trade Commission extended its review of Google’s purchase of AdMob last month, a sign that it had some concerns about the deal.
Google’s critics remain skeptical the Apple-Quattro deal will alter the landscape for Google. “It really doesn’t change things because the core fact of Google being the dominant search engine buying the number one in applications advertising isn’t changed,” said Scott Cleland, a consultant and vocal Google critic who has urged the FTC to block the deal.
Critics have also raised concerns that extend beyond a traditional antitrust analysis. Two watchdog groups, The Center for Digital Democracy and Consumer Watchdog argued that the deal raises concerns about consumer privacy that arise from combining the Google’s vast data mines with those of AdMob.
Even though privacy issues are not often considered by the FTC when it reviews a merger, Chairman Jon Leibowitz has raised the issue in reviewing a previous Google deal.
After an eight-month investigation in 2007, the Commission approved Google’s purchase of DoubleClick, an online display advertising platform (as opposed to Google’s text-based advertising). In a separate statement then Commissioner Leibowitz called attention to the privacy concerns the deal, and the industry, raised.
The “rampant tracking of our online conduct…raises critical issues about the sufficiency of companies’ disclosures…and the security and confidentiality of the massive collection of sensitive personal data,” he said at the time.
Google’s critics raise that precedent in arguing against this deal. “The Obama FTC has shown a willingness to use [its authority] to protect competition but also to protect consumers,” Jeff Chester, the director of the Center for Digital Democracy, said in a interview.
Google also launched its own Nexus One phone today, highlighting the potential vertical concerns of its AdMob acquisition. “The FTC may be concerned that Google will control access to key mobile advertising technology or services needed by competing smart-phone platforms,” said former FTC assistant director and current Howrey partner Michael Cowie, in an interview.
Google has continued to say it doesn’t anticipate any regulatory issues with the deal.
updated 1/6/09 at 9:47 am
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Updated: 9:39 a.m.
The Federal Trade Commission filed suit against Intel Corporation today, alleging that the chip giant had “waged a systematic campaign to shut out rivals’ competing microchips by cutting off their access to the marketplace,” according to the agency’s press release this morning.
After what two commissioners called an “unprecedented” four meetings of the commission, it voted unanimously to file suit. The complaint alleges that Intel “fell behind in the race for technological superiority,” and resorted to “deception and coercion” to catch up, according to a statement by Chairman Jon Leibowitz and Commissioner J. Thomas Rosch.
The FTC brought it’s case largely under a rarely used separate authority granted to the commission, the commissioners said, in order to limit any private liability Intel might be subject to as a result of the lawsuit.
“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard A. Feinstein, Director of the FTC’s Bureau of Competition in a statement. “It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits.
The commission is hosting a press conference later this morning. We’ll bring you updates as the story develops.
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As Comcast Corp. gears up for a trip through the Washington regulatory maze over its proposed purchase of NBC, it is still unclear which route that trip will take.
The deal, which was announced last week and valued NBC Universal at $30 billion, would give Comcast a 51 percent stake in NBC Universal. NBC’s current owner, General Electric Co., would hold the remaining 49 percent.
Will the deal go through the Federal Trade Commission, which has reviewed a slew of cable deals, or through the Justice Department, which boasts telecom and media expertise? And what roadblocks might the third agency involved, the Federal Communications Commission, throw up in the way?
Both the FTC and the Justice Department share authority in reviewing mergers for antitrust concerns and divide the work, through a process known as clearance, largely based on their expertise in dealing with certain industries.
Some merger reviews are easy to divvy up. Airlines and agriculture go to the Justice Department for example, while pharmaceuticals and grocery stories go to the FTC. The division of labor can get granular: Beer goes to DOJ, for example, while liquor goes to the FTC.
In areas where neither agency has a clear advantage in expertise, the decision goes up the chain of command and the two agency bosses — the head of the Justice Department’s Antitrust Division and the chairman of the FTC — eventually duke it out.
One of the last big clearance fights to make its way to the top for a decision on which agency should perform the review was the settlement between authors, publishers and Google over the search giant’s plan to distribute digital copies of books online, according to two people with knowledge of the process. It was an argument that Assistant Attorney General Christine Varney ultimately won, and the Justice Department is reviewing the revised settlement.
Which agency reviews the Comcast deal, according to attorneys familiar with the process, will again be determined between Varney and FTC Chairman Jon Leibowitz.
The Justice Department reviewed the merger between News Corporation and Direct TV in 2003, which raised issues that are likely to crop up in the Comcast deal. But the FTC has reviewed other cable deals, including Adelphia Communications Corp.’s sale to Comcast and Time Warner Cable Inc., which it approved in 2006.
The Comcast-GE joint venture perhaps most resembles the 2001 merger of AOL and Time Warner. The FTC reviewed that deal but, according to former FTC chairman Timothy Muris, in comments he made to a federal commission that explored updating antitrust laws, both agencies decided at the time that it wouldn’t serve as a precedent for future debates over who should conduct such clearances.
And while the Justice Department and the Federal Trade Commission debate which agency will get to review the competitive aspects of the deal, it is a third agency — the Federal Communications Commission, experts say — that might in the end play a bigger role in deciding whether the deal eventually goes through.
Comcast chief executive Brian Roberts met with FCC commissioners yesterday, according to a Bloomberg story. One commissioner, Michael Copps, already stated that the deal faced a “steep climb” in order to win approval.
The Justice Department declined to challenge the similar 2003 deal between News Corp and Direct TV, in part due to the conditions the FCC imposed in order to sign off on the transaction.
In telecom mergers, the parties have to not only clear an antitrust review but also a public interest review with the FCC, which holds the relevant licenses that need to exchange hands.
The FCC has two bits of leverage that the FTC and DOJ don’t. Antitrust regulators operate under a ticking clock once Comcast gets all its paperwork in, or “substantially complies” with the agency’s requests for information, in industry parlance. That process can take up to a year or more, but once the information is in, the agency has just 30 days to make a decision. The FCC, on the other hand, doesn’t operate under a timetable.
Also, antitrust regulators would have to take a company to court and prove their case to a judge if they want to block a deal. The FCC operates under a much broader mandate and can block a deal by essentially doing nothing; it has to actively approve a license transfer in order for the deal to go through. The merging parties have to convince the agency that the deal is in the public interest in order to get the license transfer it needs.
“The standard that the FCC applies, the public interest standard, is in some ways more flexible than the antitrust standard,” said Donald Russell, a telecom expert and partner at Robbins, Russell, Englert, Orseck, Untereiner & Sauber who spent more than two decades with the Antitrust Division. The FCC does not often block transactions, but does negotiate conditions in order to approve a deal, Russell said.
The FCC review is also inherently more susceptible to public pressure. “The FCC is a more open, public process driven by public comment and overt lobbying, while the process at Justice is defined by a confidential, staff-driven investigation,” said Martin Stern, a partner at K&L Gates who spent time both at the Antitrust Division and at the FCC.
The proposed deal for Comcast to take a controlling stake in NBC has raised both antitrust and public interest concerns. Advocacy groups like Free Press and the Media Access Project have launched campaigns to stop the deal from going through.
Critics have cited questions of access both for Comcast’s rival cable providers to content owned by NBC, and for rival television channels to be included in Comcast’s programming packages. The deal has also raised questions about its impact on the future of watching television online.
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The House health care bill unveiled today would give the Federal Trade Commission new authority to investigate anti-competitive behavior in the insurance industry.
It’s the latest in a series of measures against insurers from congressional Democrats to subject health insurers to greater federal oversight.
On page 149 of the nearly 2,000-page bill, lawmakers propose giving the FTC the ability to “prepare reports” and “conduct studies” on the business of insurance without a request to do so from Congress.
FTC Chairman Jon Leibowitz said in a statement he was “pleased” with the provisions, which he said would “remove an anachronistic antitrust exemption and ensure that consumers are protected from anticompetitive behavior.”
The FTC has long examined pharmaceuticals, healthcare and other industries. But it has been barred from investigating certain parts of the insurance industry without a request from Congress for almost three decades.
The FTC both enforces competition laws and conducts studies of industries that are used to shape policy. Recent FTC reports have been cited at congressional hearings and in court opinions.
“These studies do carry significant weight,” said Mike Cowie, a former FTC director and current antitrust partner at Howrey in D.C. who represents a pharmaceutical firm that is a subject in an FTC study on the pricing of generic drugs.
The new authority would allow the FTC to gather data and documents from insurers in a lesser version of subpoena power, Cowie says.
Also in the House bill is a partial repeal of a 1940s law that exempts insurers from federal antitrust regulations. That provision would allow both the Justice Department and the Federal Trade Commission to investigate and punish antitrust violations in the health insurance industry.
The FTC and the Justice Department have overlapping authority in enforcing competition rules, and divide cases between them based on industry and expertise. The insurance industry has been the domain of the Justice Department, since the FTC has been barred from devoting resources to insurance investigations.
When the FTC issued a report on the health care industry a few years ago, for example, it was able to include information on health insurance only because the Justice Department was a co-sponsor of the study.
But even though insurance is generally an industry covered by the Justice Department, the new authority could lead to further action by the FTC.
If the agency discovers conduct on its own, there’s a good chance it would see the case through, said Kenneth Glazer, a former deputy director at the FTC and current antitrust partner at K&L Gates. “If an agency takes the initiative,” he said, it’s not inconceivable that they could do it.”
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Justice Department and the Federal Trade Commission officials said today they will consider revising 17-year-old guidelines regulators rely on when judging whether proposed business mergers are anticompetitive.
“In light of legal and economic developments that have occurred since the last major revision of the guidelines, it is an appropriate time for the antitrust agencies to conduct a review of the guidelines to determine whether any revisions should be made to better protect American consumers and businesses from anticompetitive mergers,” said Christine Varney, Assistant Attorney General in charge of the Department’s Antitrust Division, in a statement.
After a period of public comment, the agencies will host five workshops, scheduled to take place in December and January. (The FTC will post a series of questions on its Web site later today to jump-start the discussion. They can be found here.) Varney said the regulators’ goal is to provide businesses “greater certainty when making merger decisions,” creating a more competitive marketplace that benefits consumers.
Dow Jones’ Brent Kendall nicely summarizes the arguments for revision:
Advocates for revising the merger guidelines, published in 1992, say the government’s written merger policies no longer accurately reflect the real-world practice of how U.S. antitrust agencies review mergers, which creates uncertainty for companies considering merger and acquisition transactions.
Critics also say the merger-guideline numbers used for measuring business-market concentration are too low and flag too many mergers as having possible anticompetitive effects.
FTC Chairman Jon Leibowitz said the 1992 guidelines include language anticipating revision from time to time. ”We think the time has come to do that,” he said a statement.
According to a DOJ news release, the regulators will consider the following topics:
the overall method of analysis used by the agencies; the use of more direct forms of evidence of competitive effects; market definition; market shares and market concentration; unilateral effects, especially in markets with differentiated products; price discrimination; geographic market definition; the relevance of large buyers; the distinction between uncommitted and committed entry; the distinction between efficiencies involving fixed and marginal cost savings; the non-price effects of mergers, especially the effects of mergers on innovation; and remedies.