WASHINGTON (AdAge.com) -- Microsoft today unveiled a no-holds-barred attack on rival Google's $3.1 billion purchase of DoubleClick, warning senators that the deal would give its rival unprecedented control of internet advertising in ways that could hurt advertisers and websites, drive up prices and potentially create new consumer-privacy issues.
"This merger will almost certainly result in high profits ... but it will be bad for everyone else," said Brad Smith, Microsoft's senior VP-general counsel and corporate secretary. "It will be bad for publishers, bad for advertisers and most importantly bad for consumers." He suggested the deal's implications could give a whole new meaning to the term, "being Googled."
Google, meanwhile, suggested Microsoft was making up numbers and data with little real-world validity to support the dire warnings. David Drummond, Google's VP-corporate development and chief legal officer, called concerns about market concentration coming from a software maker with Microsoft's dominance "ironic." He said the DoubleClick acquisition would allow Google to offer the additional service of ad serving but said it didn't warrant extensive antitrust scrutiny because that isn't a business Google is already extensively in. He added that rivals offer other ways to advertise or serve ads so competition exists.
The unusual fight -- until now Microsoft has said little publicly about the deal except that it deserves scrutiny -- came as the Senate Judiciary Committee's antitrust panel held a hearing on the issue. In addition to both companies, it also invited analysts and a privacy expert to speak. Chairman Herb Kohl, D-Wis., one of only three senators attending, said the deal's implications had raised members' interests. The Federal Trade Commission is undergoing a government antitrust review of the deal.
Mr. Smith told the committee Microsoft was concerned that the internet's future will be decided by recent developments in the $27 billion online advertising market. He warned the deal would make Google and DoubleClick "the overwhelmingly dominant pipeline for all forms of internet advertising."
"It is absolutely clear to us that the merger raises serious questions," he said. "Already Google is the dominant company for one of the two main types of online advertising -- search ads. If Google is allowed to proceed, it will also obtain a dominant gateway position over the other main type of online advertising."
Mr. Smith claimed the deal would give Google control of 80% of spending on nonsearch ads and unrestrained targeting power because it could use information from user searches to target ads.
"No other company will be able to target ads as profitably. It will substantially reduce the ability of others to compete," he said.
He said Microsoft believed no amount of technology innovation would ever overcome that kind of lead and warned "all of our information would flow through one pipeline."
Mr. Drummond said the 80% figure had no factual basis and questioned Microsoft's suggestion that Google would have overwhelming power when the home page web surfers use and the sites they visit can change in seconds.
Sen. Kohl said after the hearing that he didn't foresee Congress taking action to stop the deal. He said the panel will write the companies with some additional questions and may hold additional hearings. He said that the merger warrants "close examination" by the FTC.