The EC had begun a review of the proposed DoubleClick acquisition six months ago and finally determined that the purchase would not be prohibitive to competition in the world of online advertising, despite protests from competitors. In justifying its decision, the EC focused on the fact that Google offers free search capabilities and sells advertising through its AdSense network , whereas DoubleClick sells ad serving, management and reporting technology to Web-site publishers and to advertisers and agencies.

"The commission's in-depth market investigation found that Google and DoubleClick were not exerting major competitive constraints on each other's activities and could, therefore, not be considered as competitors at the moment," the EC said. "Even if DoubleClick could become an effective competitor in online intermediation services, it is likely that other competitors would continue to exert sufficient competitive pressure after the merger."

Competitive Concerns

The EC also analyzed the potential impacts of the Google acquisition on competing ad servers. During its investigation, third parties raised concerns that giving Google the power to control DoubleClick's tools could put Google in a position to raise costs for rivals.

Competitors also suggested that Google could require companies purchasing ad space to purchase DoubleClick's management and reporting tools.

However, the EC decided the merged company would not have the "ability to engage in strategies aimed at marginalizing Google's competitors, mainly because of the presence of credible ad-serving alternatives to which customers (publishers/advertisers/ad networks) can switch, in particular vertically integrated companies such as Microsoft, Yahoo and AOL."

The EC further found that a Google-DoubleClick merger would have no incentive to close access to competitors in the ad-serving market, mainly because it wouldn't be profitable.

Delayed for Months

Greg Sterling, principal analyst at Sterling Market Intelligence, was not surprised that the EC approved the merger. But he said it's noteworthy that Google's rivals were able to delay the formal acquisition for six months. Analysts predict similar moves from Microsoft's competitors if it acquires Yahoo.

"Even though some are concerned about privacy and conflicts of interest, the EC's decision is probably the right outcome," Sterling said. "Privacy is a distinct issue from the antitrust analysis. The Microsoft aQuantive acquisition, Microsoft's bid for Yahoo and other recent developments have probably helped Google gain the EC's approval."

The DoubleClick Ripple Effect

The DoubleClick acquisition will bolster Google's position in the display-ad space, but Google is not relying completely on DoubleClick to grab more brand advertisers. The search king has other ways to compete with Yahoo's dominance in display advertising.

That dominance brings the story full circle to Microsoft's $44.6 billion bid for Yahoo. Microsoft's interest in Yahoo can be traced, to some degree, back to Google winning its bid for DoubleClick, which alarmed Microsoft, Sterling said.

"Google was already dominant in the search advertising market, then there was a danger that the company would become a major player in display advertising," Sterling said. "Google's moves to strengthen its display-advertising business has accelerated Microsoft's efforts to buy its way into more market share."