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and indirect) are central ingredients of all these foreclosure theories. Given that the likely foreclosure effects of these exclusionary strategies rely on these assumptions, the Commission's analysis focused on establishing whether these assumptions were confirmed by the market investigation.


          Ability to foreclose

    • 295.

      The theories of harm based on the vertical and conglomerate dimensions of the merger assume that the merged entity would have the ability to foreclose competing networks (through the strategies described) because DoubleClick has significant market power in the supply of ad serving tools, publishers face high switching costs with respect to the ad serving technology, ad serving tools are an important component of the indirect distribution channel for online advertising and there are strong direct and indirect network effects.

  • 296.

    First, the market investigation has revealed that DoubleClick faces a number of competitive constraints and is not able to exercise any significant market power. As discussed in paragraphs 119-175, while DoubleClick is the leading supplier of publisher and advertiser ad serving tools in Europe and worldwide, it faces strong competition from a number of rivals as evidenced, in particular, by the price pressure in recent years leading to price reductions for existing and new customers and the extent of actual customer switching (both large and small customers). Indeed, on the publisher side, DoubleClick competes with 24/7 OpenAdstream (owned by WPP), ADTECH (owned by AOL), aQuantive/Atlas (owned by Microsoft) and a number of smaller competitors, some of which are strong on a national basis150 (Smart AdServer/Axel Springer, Openads, Newtention, Adition, Exponential, Adnologies, ValueClick, Adnet, CheckM8, Mediaplex, Eyeblaster and TradeDoubler). On the advertiser side, DoubleClick competes with aQuantive, ADTECH and several smaller competitors (Mediaplex/ValueClick, BlueStreak/Aegis, Openads, Newtention, Adnologies, Adition, Smart AdServer/Axel Springer, Sapient). Moreover, the threat (by large publishers or ad networks) of developing and switching to an in-house ad serving solution constitutes an additional competitive constraint on ad serving tool suppliers such as DoubleClick.

  • 297.

    In view of these competing alternatives, the level of switching costs is relevant for the competitive assessment because high switching costs may enhance the degree of market power of the parties (by raising barriers to entry or expansion) and facilitate foreclosure as customers are less able to react to foreclosure strategies (such as price increase, quality degradation or bundling). As indicated in paragraph 138, the market investigation has revealed mixed opinions. Switching costs are considered to be significant by a number of customers (including customers that have never switched) and modest by others. Yet, the evidence on actual switching suggests that the obstacles to switching are indeed manageable. The notifying party has also provided evidence on price decreases achieved by DoubleClick's customers over time through the renegotiation of contract terms at the renewal of the contract, as referred to in


For example, DoubleClick has lost a few customers to Adition in Germany and Smart Ad Server in France.


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