By Adam Snukal

Give Google credit that when it announced in November its acquisition of AdMob, a leading provider of mobile advertising services and technology, it proactively addressed the likelihood of an Federal Trade Commission investigation into the transaction. 

Google even posted a Web page which the media, regulators and other interested parties alike could access that explained why it believed the deal did not pose any ?competitive? (note: antitrust) concerns. 

Whether it was a self-fulfilling prophesy or just an inevitable step whenever Google makes an acquisition in the digital advertising space, Google recently announced it had received a second request for information from the FTC on the AdMob acquisition.

This, however, is familiar territory for Google, which has been the target of government scrutiny over previous deals.

The FTC held an eight-month investigation into Google's plan to buy DoubleClick Inc. in 2007 before approving that transaction. And last year, Google walked away from a search deal with Yahoo after the U.S. Department of Justice indicated that it would consider blocking the agreement and strategic alliance.

Backlash is the new feedback
What Google may not have expected is the data privacy and consumer protection industry group backlash that has taken up the not-yet completed transaction as a struggle to protect consumer data and the mobile advertising market. 

At least two prominent consumer groups reportedly approached the FTC asking it to block the acquisition, arguing that a Google/AdMob combination would put ?significant amounts of data for tracking, profiling and targeting? of U.S. mobile consumers into the hands of a single advertising network. 

Google and AdMob combined will form the largest mobile advertising company, with 30 to 40 percent of the market, according to Karsten Weide, an analyst with market researcher IDC in San Mateo, CA. 

These groups want the FTC to consider whether Google's access to AdMob's technology will give it an unfair advantage in selling mobile advertising.

Understandably, Google has asserted that the economic/market effect of such an acquisition would be almost impossible to measure against the dozens of other mobile ad networks which compete with AdMob on a daily basis. 

Moreover, a spokesperson for Google has suggested the deal will provide users with more free mobile applications, in some cases as an alternative to pay-to-download applications, since it will allow developers to subsidize their products through better and more targeted mobile advertising.

One interesting issue that has arisen from this and other similar transactions over the last couple of years is whether and how consumer privacy fits into an FTC antitrust analysis.

Per se, ipso facto
It is well documented that the FTC primarily rests its antitrust analysis on two categories: (i) agreements that are per se illegal, and (ii) agreements that are analyzed under the Rule of Reason. 

Types of agreements that have been held per se illegal include agreements among competitors to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. 

On the other hand, agreements not challenged as per se illegal are analyzed under the Rule of Reason to determine their overall competitive effect. 

A Rule of Reason analysis entails a flexible inquiry and varies in focus and detail depending on the nature of the agreement and market circumstances. 

While this analysis still begins with a review of the primary agreement (e.g., merger, joint venture or license) driving the FTC?s analysis, it will then extend to other external factors.

Largely until 2007 and the Google/DoubleClick transaction, the issues and types of analysis described above were primarily centered on consolidations and combinations of goods and services, and not privacy or consumer information.  

However, during the FTC?s review of Google?s acquisition of DoubleClick, all five FTC commissioners who reviewed that transaction agreed that data privacy can constitute a form of non-price competition under a Rule of Reason analysis and, where or when appropriate, should be considered as one of many pieces in their study and review of a prospective transaction. 

In fact, the FTC, in its decision approving the Google/DoubleClick transaction, said, ?We investigated the possibility that this transaction could adversely affect non-price attributes of competition, such as consumer privacy.? 

At the core of the FTC?s review was whether, given the nature and economics of online and digital advertising, the concentration of user information that results from a Google/DoubleClick combination meant that no other company would be able to buy, target and optimize ads as profitably, thereby substantially reducing the ability of other ad networks to compete.

On what basis, then, is consumer privacy evaluated?

Privacy issues public
Proponents have successfully argued that privacy harms can reduce consumer welfare, which is a principal goal of modern antitrust analysis.

In addition, these same groups have argued that privacy harms can lead to a reduction in the quality of a good or service, which is a standard category of harm that results from excessive market power.

On the other hand, those who oppose the incorporation of a privacy review in any antitrust analysis generally rest their argument on two points.

First, they disagree that privacy is a competition-related issue and point to precedents in which non-competition issues (such as pollution) have not been traditionally factored into an antitrust analysis.

Next, these transactions have proven themselves to create market efficiencies and improved offerings or technology which ultimately benefit consumers with a more personalized online experience.

This latter opinion may best be summarized in a Yahoo statement from 2008: ?The advertising model has made Internet content and services available to millions of people in the United States and around the world ? for free. The business model of relying on advertising revenue to fund Web sites has meant that vast amounts of information on the Internet ha[ve] been fully accessible to people of all ages and income levels.?

Why does this issue matter?

Those who ignore history are doomed to repeat it.

Our economy today is flush with companies that have been created to essentially trade in almost every aspect of behavioral advertising and consumer data. 

In fact, one might argue that consumer data has become a currency of sorts in the digital advertising and media industries. 

As consumer privacy becomes, on the one hand, increasingly protected by both legislation and self-regulatory initiatives (leaving aside the even more complex discussion of the implications of cross-border transactions and acquisitions where the same piece of consumer data may be subject to varying laws), but also a valuable commodity that is highly sought after, companies should be more aware of the legal implications associated therewith in all spheres of their business ? including the arena of mergers and acquisitions. 

Whether one agrees or disagrees with the stance that consumer privacy should be factored into an FTC antitrust analysis, it seems unlikely the FTC will shift from the position it seems to have taken ? as evidenced by the Google/AdMob transaction ? over the last couple years.

Therefore, companies that are contemplating mergers or acquisitions in the digital media and advertising arenas should at least consider the implications that consumer privacy may have on their deals.

Adam Snukal is senior associate at law firm Reed Smith's advertising technology and media group in New York. Reach him at .