Post details: FTC Approves Google-YouTube Merger

FTC Approves Google-YouTube Merger

Posted by andrew on November 2nd, 2006

According to this news item, the Federal Trade Commission has voted not to challenge Google's $1.65 billion acquisition of YouTube.

I haven't yet been able to find notice of the decision on the FTC's Web site, but I'm a little puzzled already that the agency didn't even consider it necessary to issue a Second Request in this case. According to Hitwise, the pre-merger shares of YouTube and Google in the online video market were 45 percent and 11 percent respectively, giving the merger a whopping delta (i.e., increase in the HHI) of 990 points in an already highly concentrated market. I know we've come a long way from expecting the agencies to observe the thresholds stated in their own Horizontal Merger Guidelines, but this is ridiculous.


Mergers producing an increase in the HHI of more than 50 points in highly concentrated markets post-merger potentially raise significant competitive concerns, depending on the factors set forth in Sections 2-5 of the Guidelines. Where the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise.

Worse, I can't think of any procompetitive efficiencies that could be attributed to the merger. Google doesn't need YouTube's video hosting, uploading or streaming technology: Google Video already supports these functions. Google doesn't appear to need, or even value positively, YouTube's distinctively anarchic culture: as many observers have noted, Google has to take care that it is not "buying a lawsuit." So it seems to me that the value of the YouTube acquisition to Google subsists almost entirely in the elimination of a competitor and the assumption of its market share. If these count as efficiencies at the FTC these days, Microsoft ought to look into acquiring Apple.

Added November 3: The blog PVRWire has an interesting posting describing some even more questionable behind-the-scenes collusion between potential copyright plaintiffs and the parties to the merger.

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