Reports: EU to Remove Last Barrier to Google-DoubleClick Merger

European Union regulators are poised to approve Google's (Nasdaq: GOOG) acquisition of DoubleClick (Nasdaq: DCLK), according to published reports, handing the search giant a major victory and clearing the way for the US$3.1 billion takeover to be closed quickly.

The European Commission will approve the merger without conditions, a number of reports say, setting aside pleas from rival Microsoft (Nasdaq: MSFT) that the deal will limit competition and from consumer groups who say the deal has negative implications for Web user privacy.

The EC's deadline for making a decision on the merger is April 2, but it could rule any time before that date. The Wall Street Journal cited unnamed sources who said the formal decision will be announced on March 11.

Google did not respond to a request for comment on the reports; a call to the European Commission's press office was not immediately returned.

Approval from European regulators is the final hurdle for Google to clear before the deal can be finalized and integration work can commence. Google executives have repeatedly expressed confidence the deal would be approved and could be closed sometime in the first half of this year.

Word of the impending approval could not help Google's stock buck the trend in a down market. Shares were lower, by about 2 percent, in midday trading to $439.28.

Clean Sweep?

If a condition-free approval comes through for the deal, it would be a blow to Microsoft, which had hoped to convince regulators the deal would consolidate too much market power in the Web advertising arena. The fact that the argument came from Microsoft, which has battled the EC for years over its own antitrust issues, may have made those efforts more difficult.

"Microsoft was clearly trying to block this deal but, because they are not in best graces with the EU, their ability to do this was badly compromised," Enderle Group Principal Analyst Rob Enderle told the E-Commerce Times. "It reflects on the fact that Microsoft's competitors, like Google, have access to tools that currently don't work for Microsoft," such as getting regulators to take their side.

It's not clear if the deal raises the stakes or adds urgency to Microsoft's efforts to land Web portal Yahoo (Nasdaq: YHOO), Enderle added. Microsoft's $44.6 billion offer for the company has so far been rejected by Yahoo's board.

"The Yahoo deal isn't as strategic to Microsoft as DoubleClick was to Google," he said. "The reality is that Yahoo is largely a defensive move, which buys Microsoft time, while DoubleClick was offensive and positioned Google more strongly on their planned path to a dominant market position. Getting Yahoo -- even if it does happen -- doesn't come close to matching Google's move with DoubleClick."

Privacy a Nonissue?

U.S. regulators cleared the deal in December, when the Federal Trade Commission approved the merger despite vociferous arguments from consumer groups about the privacy implications of combining a search engine with a massive store of data about consumers' Web use with an advertising company with its own databases full of personal information.

The FTC ruled that the deal was "unlikely to substantially lessen competition" and largely left the privacy issues unaddressed. Groups such as the Center for Digital Democracy and the Electronic Privacy Information Center had pressed regulators to restrict how the companies used their combined databases to target consumers.

If the reports are true, the EU is essentially agreeing with the FTC that the deal will not harm competition -- that the two companies deal in different markets and that the Web advertising marketplace will still have plenty of room for competition, Yankee Group Senior Analyst Laura DiDio told the E-Commerce Times.

"There appears to be confidence among regulators that the online advertising markets around the world still have plenty of room for others to grow and innovate after this deal is done," DiDio said. "The fact that the market is still young and evolving may help support that argument."