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Why Privacy is a competitive issue in FTC's Google-DoubleClick merger review

Just after Google's CEO Eric Schmidt summarily dismissed privacy concerns as an issue in the FTC's review of the Google-DoubleClick merger, a privacy watchdog group said "Google inc.'s privacy practices are the worst among the Internet's top destinations," according to an AP article "Watchdog group slams Google on privacy." 

  • "...London-based Privacy International assigned Google its lowest possible grade. The category is reserved for companies with "comprehensive consumer surveilance and entrenched hostility to privacy."

American privacy groups are petitioning the FTC (EPIC, CDD, and US PIRG) to address the privacy issue in the context of the Google-DoubleClick merger.

  • Privacy groups in the US and in Europe are rallying around this issue, because as the NY State Consumer Protection Board has said: "Google's database...will make up the world's single largest repository of both personally and non-personally identifiable information."
  • Investors and others that dismiss privacy as a competitive concern in the Google-DoubleClick merger -- do so at their own peril.

Why is privacy a competitive issue in the Google-DoubleClick merger?

  • Private information on customers is among the most valuable and coveted commercial information any company could have.
    • By definition, it is info that a consumer does not want others to know precisely because the user is afraid of being vulnerable to having the private info in the "wrong hands."
    • Consumers know the many ways private info could be used to hurt them, endanger them, ruin their reputation, or simply embarass them.
    • They know it can be used to sell them things they do not want to hear about.
    • It is telling that one of the most common American phrases concerning privacy is "it's none of your business."
  • Private information is also heavily restricted for many types of companies: i.e Health care providers of all types, financial services companies and communications companies.
    • These companies are well versed in safeguarding this information and have substantial policies and internal controls to protect their customers from harm or abuse.
    • Google and DoubleClick have a big and unfair competitive advantage over a wide variety of real and potential competitors because Google does not have to safeguard health care, financial or communications private information that competitors do.
    • One explanation for Google's growth and competitive prowess is its aggressive arbitrage of the spirit and maybe the letter of privacy laws and regulations, which enable Google to have much better business and demand intelligence, and online advertising targeting than their competitors.
  • If the FTC agrees with the EPIC complaint that Google's misuse of private information is an unfair and deceptive trade practice, it would cut to the core of Google's extraordinary competitiveness and exceptional monetization of online advertising through personal behavior targeting and super-personal-profiling.
    • Simply, the EPIC complaint is basically alleging Google's business model has illegal elements to it which require radical changes.
  • Misuse of private information is also a corporate ethics issue.
    • Under Sarbanes-Oxley, Google and DoubleClick could be vulnerable to not fairly upholding sound business practices and corporate ethics that would protect public shareholders from the corporate risk of misrepresentation, fraud or other types of malfeasance.
    • Remember, Google's CEO has assured public shareholders that privacy is not a material problem for the Google-DoubleClick merger nor an internal control vulnerability. 
      • He had better hope the FTC agrees.