Google’s onetime hired gun could now be its antitrust nightmare

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Makan Delrahim

If Makan Delrahim goes after Google, he could align the Trump administration with progressive Democrats. | Cliff Owen/AP Photo

When Google needed government sign-off on a 2007 acquisition that would tighten its grip on the digital advertising market, the company turned to antitrust attorney and lobbyist Makan Delrahim to help get the job done.

Now, as the Justice Department’s top antitrust enforcer, Delrahim could be the one to undo it all.

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As U.S. competition enforcers cast a more critical eye on the nation’s biggest technology companies, Delrahim would play the leading role in any DOJ lawsuit accusing Google of stifling markets and harming consumers. It’s a striking turn of events given the assistant attorney general’s past role in shepherding the company’s $3.1 billion purchase of DoubleClick, a display advertising and ad tech firm that has played a central part in establishing Google’s market dominance.

“He worked on the key merger and, ironically, his job now is to undo the consequences,” said Jeff Chester, executive director of the Center for Digital Democracy, a Washington-based public interest group that opposed the Google-DoubleClick deal on the grounds that it would harm consumer privacy and depress competition.

Delrahim, a 49-year-old Iranian émigré with decades of antitrust experience and some light dabbling in Hollywood, has declined to discuss his plans with regard to Google. But the Justice Department began laying the groundwork weeks ago for a possible probe of the company, and Delrahim has already drawn a harder line than many antitrust observers had expected in opposing the accumulation of corporate power.

The prime example so far is the unsuccessful lawsuit his staff waged last year in an attempt to stop AT&T from gobbling up entertainment provider Time Warner, an $85 billion merger that gave control over a vast arsenal of film and television programming to a major internet, pay-TV and satellite provider.

If Delrahim goes after Google, he could align the Trump administration with progressive Democrats who also have major beefs with Silicon Valley — further demonstrating the growing political peril for the nation’s biggest tech companies.

Several Democratic candidates running for president, led by Massachusetts Sen. Elizabeth Warren, have said antitrust officials should take a hard look at breaking up tech companies that wield too much influence over markets and people’s digital lives. Warren has specifically named Google’s purchase of DoubleClick as one previously approved merger the government should look at reversing — along with examples such as Amazon’s acquisition of Whole Foods and Facebook’s purchase of Instagram.

Delrahim himself has spoken more critically of the industry of late. He told an antitrust conference last month in Israel that “the current landscape suggests there are only one or two significant players in important digital spaces,” including internet search and social networking — a not-so-veiled reference to Google and Facebook.

He also suggested broadening the government’s typical standardfor judging whether a market lacks competition, saying it’s not enough to rely solely on price increases — especially when internet companies offer services free of charge, such as Google’s ad-supported search engine. Instead, he said, they also have to look for other harms to consumers, such as diminishing privacy or free speech.

Delrahim’s emerging critique contrasts with his past advocacy for Google.

In 2007, Google paid a team of five lobbyists from Brownstein Hyatt Farber Schreck, one of Washington’s largest lobbying firms, roughly $100,000 to help usher the DoubleClick acquisition through Washington’s regulatory machine, lobbying disclosure records show. Delrahim was among them.

He had joined the firm two years before that following his first stint in the Justice Department’s antitrust division, where he was deputy assistant attorney general under President George W. Bush.

During Delrahim’s first tour at the DOJ, antitrust investigators ramped up scrutiny of radio giant Clear Channel (now iHeartMedia), which faced allegations it used its stations to hurt competitors of its concert promotion business. Clear Channel ultimately sold the concert business. Delrahim also worked on the Senate’s antitrust investigation into Microsoft in the late 1990s.

“Those two things, I think, reflect the fact that Makan has a real interest in conduct investigations, and that interest is relevant to the tech firms today,” said Allen Grunes, an antitrust attorney at Konkurrenz Group who worked with Delrahim at the DOJ. “It doesn’t tell you how he’s going to come out, but it does tell you that he’s got experience that’s relevant and he is interested in these issues.”

After leaving the DOJ, Delrahim spent more than a decade at Brownstein. In addition to Google, he also registered to lobby for other major tech corporations, namely Apple, Microsoft, Intel, Qualcomm and Oracle.

Google needed the hired guns. The Silicon Valley behemoth had only recently opened a Washington office and lacked antitrust experts to help it deal with political opposition to the DoubleClick acquisition, said a person familiar with Google’s Washington engagement.

“At a time when Google didn’t have a lot of deep connections to conservatives on Capitol Hill, I think Makan was viewed as somebody who could bridge that gap and really understood antitrust,” the person said.

The acquisition of DoubleClick,which helps match advertisers to internet users, allowed Google to expand from text-based ads in search results to the visual display ads found on websites all across the internet. More importantly, the deal also gave Google ownership of behavioral advertising technology that would allow it to better target ads to users based on their online activity. In 2018, Google controlled 38 percent of the $109 billion U.S. digital advertising market, followed by Facebook at 22 percent and Amazon at just under 7 percent, according to research firm eMarketer.

Delrahim’s lobbying efforts focused largely on Capitol Hill, where he had worked for five years on the Senate Judiciary Committee, the person familiar with Google’s D.C. strategy said.

The panel’s antitrust subcommittee called a hearing on the acquisition in September 2007, where Google Chief Legal Officer David Drummond defended the deal as a means to “help publishers and advertisers generate more revenue” and give consumers more “relevant and useful advertising.” Microsoft’s then-general counsel, Brad Smith, was among those warning about the deal’s impact, telling lawmakers it posed an “imminent risk of giving a single company the degree of market power that could foreclose competition.” Ultimately, however, Congress didn’t get in the way.

“In the end, there wasn’t a huge amount of pressure on the Hill, and the people who were working on that did a good job of tamping it down,” the person said.

The Federal Trade Commission cleared the DoubleClick deal in 2007, with one independent commissioner, Pamela Jones Harbour, dissenting from the decision. While Harbour warned about how the two firms could combine their troves of consumer data, the commission’s majority said that “the evidence did not support the theories of potential competitive harm” and that consumer privacy concerns were not unique to Google.

The deal also passed muster with the European Commission, which called it “unlikely to have harmful effects on consumers … or significantly impede competition.” Consumer privacy groups were dismayed at the ruling. The leader of one advocacy group, Privacy International, called the decision “this decade’s greatest threat to online privacy.”

The regulators’ logic looks naive in retrospect, Google’s critics say. It’s clear now that the DoubleClick deal helped the company consolidate power in the online ad business, said Sally Hubbard, director of enforcement strategy at Open Markets Institute, a liberal think tank that wants increased antitrust scrutiny of the big tech companies.

“The DoubleClick merger is one of those deals you look back on and say, ‘That was a mistake,'” she said.

“The majority opinion said this is a robustly competitive market, there’s going to be so much competition in the future. And you can see that’s not how it played out,” Hubbard said. “There’s very little competition. Google has really consolidated the ad tech market, and this merger was definitely an anti-competitive merger.”

Delrahim has occasionally weighed in on Google’s antitrust woes since then. In 2011, for instance, he told POLITICO that the FTC has more leeway than the DOJ to investigate the company for anti-competitive behavior. This, he said, stems from Section 5 of the FTC Act, which allows the agency to penalize unfair or deceptive competition practices, having “a much lower standard of proof” than the price-driven rationale the DOJ uses in competition probes.

Google declined to comment for this story. CEO Sundar Pichai told CNN in June that large companies expect to face scrutiny, but he argued that big is not necessarily bad, saying Google’s size allows it to innovate with emerging technologies. Google has also said it faces competition from Facebook and Amazon in the digital advertising market.

Warren has urged Delrahim to recuse himself from any antitrust review involving his former clients Google and Apple. But his work for them is more than a decade old, so it falls outside the scope of the government’s ethics rules. Delrahim returned to government as deputy White House counsel for President Donald Trump in January 2017, and moved over to Justice that September. He now heads the department’s antitrust division.

A DOJ official told POLITICO that agency staff “take potential conflicts very seriously, and work closely with their respective ethics officers to determine when recusal is appropriate or required.”

At his Senate confirmation hearing in May 2017, lawmakers pressed Delrahim on how he would handle potential conflicts of interest from his time in the private sector. He pledged then to consult career ethics officials about recusals. “l have three little children. I have no intention of going to jail,” he told the senators.

While Washington has been central to Delrahim’s career, he also spent years in between government gigs living in Los Angeles. There, he’s dabbled in the film industry, serving as an executive producer and investor in 2016’s “Trash Fire,” a horror-comedy film starring Adrian Grenier of “Entourage” fame. (The “nihilistic black comedy may leave a sour taste with some viewers,” the website Rotten Tomatoes advises.)

Hollywood remains an area of interest for Delrahim, who as antitrust chief sent the Oscars a warning letter after Steven Spielberg proposed blocking Netflix and other streaming services from being considered for awards. “[S]uch conduct may raise antitrust concerns,” Delrahim wrote.

Antitrust probes can take years to play out, and it’s unclear if Delrahim will remain at DOJ to see any antitrust investigation of Google through to its conclusion. He is already approaching two years in an administration where high-profile officials tend to have a short shelf life. Rachel Brand, who was the DOJ’s No. 3 official, left her post as associate attorney general in February 2018 after just nine months.

For now, opinion is split on how Delrahim’s links to Google could factor into a future antitrust probe.

Hubbard of Open Markets says Delrahim will have to make a “judgment call” if DOJ staff recommend legal action against the company, noting, “That’s where the politics and existing relationships and past experiences could really influence that in the wrong way.”

But the person familiar with Google’s Washington efforts said Delrahim’s knowledge of the company could also be an advantage in scrutinizing its operations.

“To be honest, I would be more nervous if I was Google. They now have an enforcer who is well informed about some aspect of their business, albeit from a decade ago,” the person said. “I think you have an enforcer who is more likely to call B.S. on them if he doesn’t think they’re accurate.”

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