Google's purchase of advertising giant DoubleClick has been thrown into doubt by the European Commission, which has announced that it will launch an in-depth investigation into the deal on competition grounds.
The decision will be a blow to Google, putting a question mark over the deal until at least next spring. The Commission has 90 working days in which to make its decision on the future of the combined company. A decision must be made before 2nd April 2008.
The internet search giant makes most of its money from text ads that appear beside the answers to search queries. Doubleclick is an online ad-serving company whose systems post and monitor internet adverts.
The European Commission, which regulates competition law in Europe, has wide-ranging powers, including the power to block the merger in Europe.
The investigation will look at whether the combined company will be able to use its power to stop others competing with it in the future.
"[The Commission] will investigate whether the merger, which combines the leading providers of respectively, on the one hand, online advertising space and intermediation services, and, on the other hand, ad serving technology, could lead to anti-competitive restrictions for competitors operating in these markets and thus harm consumers," said a Commission statement.
The investigation will also make a more complicated analysis when it decides whether Google's purchase has the effect of eliminating a future competitor.
"The Commission will, in particular, investigate whether without this transaction, DoubleClick would have grown into an effective competitor of Google in the market for online ad intermediation," said the Commission.
The European Commission has been very active in competition cases in the technology sector this year, and won a major victory when Microsoft said it would not appeal a Commission ruling it had disputed since it was made in 2004.
Since summer it has accused memory maker Rambus of abusing its dominant market position and conducting a "patent ambush", and has said that a six year investigation into Intel revealed that the chip giant had an "overall anti-competitive strategy".