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Letter To The Honorabel Jonathan Leibowitz, Chirman, Federal Trade Commission

By:
Date:
Location: Washington, DC

Kohl Urges Close Scrutiny Of The Proposed Google Admob Merger

Today, Senator Herb Kohl sent the following letter to Federal Trade Commission Chairman Jonathan Leibowitz raising questions about the proposed merger of Google and AdMob. Please find the text of the letter below.

April 6,2010

The Honorable Jonathan Leibowitz

Chairman, Federal Trade Commission

601 Pennsylvania Avenue, N.W.

Washington, D.C.

Dear Chairman Leibowitz:

I am writing to you regarding the proposed acquisition of AdMob by Google, now under investigation at the Federal Trade Commission. It is my view that this merger raises important competition issues which should be reviewed carefully and with close scrutiny by the Federal Trade Commission.

This acquisition, if consummated, would combine Google, with a dominant share of internet search and internet search advertising on traditional desktop and laptop personal computers (PCs), as well as a strong and growing mobile advertising business, with AdMob, the leading provider of advertising to mobile devices commonly known as "smart phones" (such as the Apple iPhone). Critics of this transactions worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors, and leverage its dominance of PC-based search advertising market into the emerging mobile advertising market, particularly with respect to advertising embedded in smart phone applications. The parties to this transaction argue, on the other hand, that there are ample competitors in the smart phone search and application-based advertising market, and also contend that the market for advertising on mobile devices is too nascent to determine that any transaction will lead to dominance by any one company.

The importance of this transaction is heightened because of the likely importance of the smart phone advertising market in the future. Sales of smart phones are undergoing explosive growth. Consumers are increasingly using these phones to search the Internet and to make use of the applications downloaded onto these devices. 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. Many industry experts expect more Internet searches to be done on smart phones than on PCs in the next five to ten years and that mobile advertising on smart phones will become a dominant advertising medium. Industry experts have estimated that revenue from advertising delivered over handheld devices will leap from $416 million in 2009 to $1.56 billion in 2013.

It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search or application-based advertising on mobile devices such as smart phones. 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. 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 to carefully examine this question.

The FTC should also pay close attention to the privacy interests implicated by this transaction, as the combined firm will gain access to a treasure trove of data on millions of consumers' behavior, search and product preferences. The FTC should assure itself that the deal, if approved, will have sufficient safeguards to protect consumers' privacy.

I recognize that advertising on mobile devices, and on applications running on these devices, is a new and nascent market with business models in the process of developing. While antitrust regulators need to be cautious with respect to transactions affecting such a market, at the same time antitrust authorities should not allow harm to competition that may substantially harm competition in its incipiency. The stakes are very high in protecting a fully competitive market in this increasingly important sector of the high tech economy. Thus the incipiency of the smart phone advertising market is not in itself a reason for the FTC to desist from taking any necessary action to enforce the antitrust laws or protect competition should it determine such action is necessary. Ensuring a vibrant and competitive mobile device advertising marketplace should be a top priority for the FTC as it considers this deal.

Thank you for your attention to this matter.

Sincerely,
_______________

HERB KOHL

Chairman, Subcommittee on Antitrust, Competition Policy and Consumer Rights


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