European consumer groups warned the European Commission Thursday that Google's plan to take over the online advertising company DoubleClick, currently under investigation, would erode consumers' privacy and would push up prices for online goods and services.
In a letter to competition commissioner Neelie Kroes, BEUC, the pan-European Union consumer group, together with three national associations, urged the Commission to use its powers to block the deal in its current form.
"Consumers' privacy could be at risk; it is crucial that the Commission integrates privacy concerns into the Google/DoubleClick merger review process," said Monique Goyens, BEUC's director general in a statement.
In addition to privacy concerns, the letter also argued that combined strength of the two Internet firms would harm consumers "with respect to the price, degree of innovation, quality, and selection of online products and services that would likely be available to consumers following the merger."
Neither Google nor the Commission were available to comment.
Meanwhile, also on Thursday, the U.S. Federal Trade Commission cleared Google's acquisition of DoubleClick on a 4-1 vote after an eight-month investigation. The FTC concluded that acquisition "is unlikely to substantially lessen competition" and downplayed concerns brought by some privacy groups, saying those concerns are "not unique to Google and DoubleClick," and "extend to the entire online advertising marketplace."
The Commission's competition department has until April 2 to decide to permit the deal, approve it on the condition it is changed or prohibit it outright.
Competition reviews normally focus on the economic impact of mergers and takeovers, rather than their potential impact on privacy.
Consumer groups wrote to Kroes in June, shortly after the planned deal was announced, warning about its impact on privacy. Thursday's follow-up letter focused on the economic effects of the deal on consumers, as well as reiterating the groups' concerns about privacy.
Acknowledging that privacy falls beyond the scope of merger reviews, they nevertheless tried to persuade the Commission to bear it in mind.
"Privacy issues raised in our 27 June letter are detrimental to consumers' welfare and ought to be taken into account in the merger review process," the consumer groups said.
Economic harm to consumers would result from the deal because it would strengthen what the groups describe as the super-dominant position of Google in the online advertising industry.
"The online advertising market will be placed in jeopardy if the Google/DoubleClick merger is allowed to proceed, because the combined company will dominate both major 'pipelines' for online advertising - both the pipeline for search ads and the pipeline for non-search ads," they wrote to Kroes.
"If allowed to proceed, the transaction will enable the world's largest network for the sale of non-search online advertising (Google) to capture and use to its own benefit the dominant provider of stand-alone ad-serving tools (DoubleClick) used by web publishers to connect other networks to the non-search inventory which they need to survive and which is not already committed to Google," the letter said.
By eliminating competition between the two companies for both stand-alone ad serving tools and integrated ad networks, the deal will ultimately "reinforce Google's super-dominant position in the market for search ads," they said.
In addition to the possibility of higher prices for consumers, the deal could undermine the common business model for online publishing, which relies on advertising revenue. This could force content providers to switch to a model based around revenue from subscriptions, forcing consumers to pay for what they get free now.
"Higher online advertising prices may result in part of the advertising budgets shifting to other media, resulting in less revenue than initially forecasted for web publishers. Such publishers might then be forced to charge users to access content in circumstances where they do not do so today," the consumer groups warned.