Microsoft's failed case against Google + DoubleClick revealed

A set of policy position documents reportedly authored by Microsoft made the case that Google could use DoubleClick's advertising network to peer into competitors' traffic -- a position the FTC apparently rejected last week.

Last week, The New York Times blogger Louise Story released copies of a series of documents reportedly shared between Microsoft and US Federal Trade Commission members prior to their decision on the Google + DoubleClick merger. The documents reveal that Microsoft was willing to characterize its own competitive position in the Internet advertising market, both before and after a merger took place, as tenuous and perhaps even unsustainable, in order to distinguish itself against what it described to be a larger, perhaps predatory, competitor.

"Advertising is the fuel that powers the Internet," began one of Microsoft's position papers. "By combining the dominant network for sales of online advertising with the dominant provider of ad-serving tools (which are the advertiser and publisher 'portals' to the online advertising market), Google will obtain dominant control over the 'pipeline' for online advertising. The transaction will put Google in a position to extract an increasing portion of the money flowing between advertisers and publishers through the pipeline. It will also enable Google to use its access to, and control over, a predominant share of publisher 'inventory' (the ad space on a Web page available to be seen by users) and valuable user information to impair its rivals' ability to compete to sell and serve ads."

Though Microsoft has not denied ownership of the documents, and one continues to bear a red "confidential" stamp in the upper right corner of each page, BetaNews tests discovered that the Microsoft Word-format documents published by the Times are not original documents with Microsoft's corporate stamp. Instead, the Word template used bore the trademark of the New York Times Company, indicating that the contents may have been copied from original Microsoft documents into a separate template that doesn't include Microsoft's intellectual property.

Using a predominant metaphor with both words and pictures, Microsoft created a picture of a burgeoning Standard Oil-like monopoly on the flow of "fuel" through the Internet. This monopoly, the company argued, could be made possible through the acquisition of formerly neutral traffic monitoring and analytics tools produced by DoubleClick, into the exclusive purview of Google. Since DoubleClick's tools monitor Web traffic and ad impressions on sites hosted by major services including Yahoo and MSN, Microsoft argued, those acquired tools would give Google an exclusive peek into the traffic of competitors' portals such as Microsoft's.

With that knowledge, the company went on, Google would be in a unique position to adjust its prices for ad inventory for the sites it serves, to compensate for changes it notes in its competitors' traffic.

"Combining DoubleClick's dominant (and previously neutral) ad-serving tools with Google's dominant online ad networks," read Microsoft's position paper, "will give Google end-to-end control of the dominant, integrated pipeline for online advertising. Advertisers and publishers wishing to buy and sell non-search online advertising will have no real alternative for transacting online non-search advertising.

"As a result of its acquisition, Google will control access to an enormous share of publisher inventory," it continued. "By denying or degrading other networks' access to DoubleClick (and through it to the inventory), Google will make it virtually impossible for other networks to get sufficient scale to compete with Google."

Prior to the merger announcement, DoubleClick had begun work on ad serving tools called DART for Publishers (DFP) and DART for Advertisers (DFA). Google was believed to have been building competitive tools (Microsoft argued that Google was definitely doing so), though now the DART products are likely to be the surviving tools for the combined company's customers. That fact is especially of interest to the European Commission, whose laws give commissioners a way to forbid a merger between any two companies which previously had plans to directly compete against one another, whether or not they actually ended up doing so.

But contrary to reports, Microsoft's citations of US case law and precedent indicate the documents the Times revealed was probably only for the eyes of FTC commissioners. Nonetheless, the company argued, the merger would give Google a means to expand what it characterized as its existing exclusionary practices, by creating an environment where only one tool is available for customers to produce campaigns whose formats are supported by the entire Internet.

Forcing customers to use a single format, Microsoft argued, is an exclusionary practice that is harmful to competition, and thus should be prevented through government intervention.

In the event the merger does go through, another Microsoft position paper released by the Times suggests the combined entity be compelled, presumably by law, to adopt certain "open access" principles that mandate customers be able to use DART tools for competitors' ad networks as well as Google's. "Under this remedy," Microsoft argued, "Google would be required to allow third party ad networks such as DrivePM or ValueClick non-discriminatory access to the dominant DFP user interface and to ensure that competing ad networks and other intermediaries have an equal opportunity to compete with its dominant AdSense network for remnant inventory."

Another alternative would be to force the combined entity to divest itself of DoubleClick's DART tools portfolio -- which Google itself had previously described as among the greater prizes to be acquired through this merger -- perhaps through the sale of the software to "an independent and viable purchaser." Microsoft made no suggestions as to its identity.

Perhaps a more unprecedented alternative proposed by Microsoft would be the erection of some sort of firewall network throughout the Internet, whose express purpose would be "so that the Google commercial organization cannot see or use competitively sensitive flowing through DoubleClick's ad-serving tools." Again, the company made no suggestions as to who would be responsible for such a network.

The Federal Trade Commission cleared the merger of Google and DoubleClick last week, though Google has indicated it will wait for final approval from the European Commission before proceeding.