updated 12/20/2007 11:20:33 AM ET 2007-12-20T16:20:33

U.S. antitrust regulators approved Google Inc.’s $3.1 billion purchase of DoubleClick Inc. Thursday, removing a key obstacle to a formidable combination in the burgeoning online advertising sector.

The transaction still faces substantial antitrust scrutiny from European regulators and cannot be completed without their approval. The European Commission has set a deadline of April 2 to finish its review.

The Federal Trade Commission appeared to accept many of Google’s arguments that its online ad sales business doesn’t compete with DoubleClick’s ad-serving tools, saying its analysis “showed that the companies are not direct competitors in any relevant antitrust market.”

“The FTC’s strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers,” Eric Schmidt, Google’s chief executive, said. “We hope that the European Commission will soon reach the same conclusion.”

The deal, announced in April, will combine Google’s leading position in online text ads with DoubleClick’s ad-serving tools that help publishers place and track display ads.

Microsoft Corp., AT&T Inc. and other critics have argued the transaction would give Google a dominant share of the rapidly growing online advertising market. Google contends its business doesn’t overlap with DoubleClick’s and as a result a combination won’t reduce competition.

Privacy advocates also strongly opposed the deal, saying the combined company will have access to a huge amount of data on individual Web-surfing habits. The FTC said it lacked the legal authority to block the deal on any grounds except on antitrust matters.

However, in an apparent nod to these concerns, the FTC on Thursday proposed a set of privacy guidelines for the online advertising industry, describing them as something that “clearly transcend” the Google-DoubleClick deal. It remains to be seen how such guidelines would be enforced.

Privacy advocates were not assuaged.

The FTC “sidestepped its responsibility today when it approved the merger of two companies whose new, extended data-collection reach will give it unprecedented access to track our every move throughout the digital landscape,” Jeffrey Chester, executive director of the Center for Digital Democracy, said. The CDD and the Electronic Privacy Information Center fought the deal on privacy grounds.

The five-member commission voted 4-1 in favor of the deal. Commissioner Pamela Jones Harbour dissented “because I make alternate predictions about where this market is heading, and the transformative role the combined Google/DoubleClick will play if the proposed acquisition is consummated.”

Online ad spending is projected to reach $21.4 billion this year, according to research group eMarketer, surpassing the $20.5 billion radio advertising market for the first time. EMarketer expects online ad spending to nearly double to $42 billion in 2011.

The size of the market and Google’s bid for DoubleClick has spurred other purchases. Microsoft agreed to pay $6 billion for Seattle-based online advertising firm aQuantive Inc. earlier this year, and Yahoo Inc. bought Internet advertising exchange Right Media Inc. for $680 million in April. London-based advertising giant WPP Group PLC purchased online advertiser 24/7 Real Media for $649 million in May, while Time Warner’s AOL bought Tacoda for an undisclosed amount in July.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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