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are competitive constraints from direct sales. It therefore appears that, assuming that non-search intermediation is a separate market, Google could lack the necessary market power to foreclose rivals in the ad serving market by bundling its non-search intermediation services with DoubleClick's ad serving technology.

  • 339.

    However, for a number of other reasons the merged entity's ability to foreclose competitors by adopting the described strategy of pure bundling may be limited, not only in case of Google's non-search intermediation services as the bundling product, but also in case Google uses its search ad and its (search) ad intermediation business as the bundling product, and, more importantly, the merged entity most likely lacks the incentive to engage in the described strategy, both on the advertiser side and on the publisher side.

  • 340.

    Firstly, there may be practical difficulties in requiring advertisers wanting to place search ads via Google (or search ads and/or contextual ads via Google's ad intermediation (AdWords)) to use DFA. Search ads and contextual ads sold by Google or through Google's ad intermediation services are priced on a cost-per- click basis. The prices charged to advertisers are determined by an auction. As a result, the terms according to which Google provides (search) advertising may be set with an individual advertiser on a daily basis. Advertisers can vary their bids on different search terms as often as they wish, or withdraw altogether from advertising with Google at any time. On the other hand, the terms according to which DoubleClick provides display ad serving are set by contracts that typically have a duration of one to two years. As a result, it would be difficult to set the terms for search advertising or (search) ad intermediation and display ad serving simultaneously. Pure bundling, however, is very unlikely to be possible if products are not bought simultaneously175. There would therefore have to be a substantial change in the way the merging parties carry out their business if bundling were to be feasible, which makes bundling more difficult to put into practice, and less likely to occur. The same practical difficulties would apply in case the merged entity decided to extend the bundle so as to include also non- search intermediation. Indeed the only conceivable manner for Google to engage in pure bundling on the advertiser side without the described practical difficulties would be by making the use of DFA a precondition for advertisers to participate in the AdWords auction at all. As will be seen below, however, given the low margins on DFA compared to the margins on search advertising, Google would clearly lack the incentive to engage in such an extreme form of pure bundling.

341.

On the publisher side, the practical difficulties in bundling Google's (search)

ad intermediation with DFP appear to be more limited because for the provision of both display ad serving and (search) ad intermediation for (larger) publishers contractual arrangements of a similar nature and duration apply. As regards display ad serving, DoubleClick's contracts with publishers typically have a duration of one to two years. Regarding Google's contractual arrangements with its AFS partners, Google enters bidding contracts for the inventory of certain larger publishers, known as "direct partners"176. The contracts with these

175

See, in particular, the Non-Horizontal Merger Guidelines, paragraph 98.

176

Google's […]* direct AFS partners accounted for [>80%]* of its European AFS revenues in 2006.

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