Conflict of Interest in Google-Doubleclick Merger Review
On April 20, 2007, EPIC, the Center for Digital Democracy, and the US Public Interest Research Group filed a complaint (pdf) with the Federal Trade Commission, requesting that the Commission open an investigation into Google, Inc.’s proposed acquisition of Doubleclick, Inc. (the world’s largest Internet advertising technology firm), specifically with regard to the ability of Google to record, analyze, track, and profile the activities of Internet users with data that is both personally identifiable and data that is not personally identifiable. EPIC further urged the FTC to require Google to publicly present a plan to comply with well-established government and industry privacy standards such as the OECD Privacy Guidelines. Pending the resolution of these and other issues, EPIC encouraged the FTC to halt the acquisition. The three groups filed a supplement (pdf) to the complaint with the Commission in June, and a second supplement (pdf) on September 17, 2007. The FTC made a “second request” in its Google/Doubleclick review. According to FTC Chair Deborah Platt Majoras’ statement (pdf) on the merger review process, “the majority of investigations in which the FTC issued a second request resulted in a merger challenge, consent order, or modification to the transaction, suggesting that the FTC generally issues second requests only when there is a strong possibility that some aspect of the investigation would violate the antitrust laws.” On December 21, 2007, the FTC approved the proposed merger without conditions in a 4-1 opinion (pdf). EPIC responded (pdf), saying that the unique circumstances of the online advertising industry required the FTC to impose privacy safeguards as a condition of the Google- Doubleclick merger. EPIC said that the FTC “had reason to act and authority to act, and failed to do so.”
For more information regarding the Google-Doubleclick merger, see EPIC’s page: Privacy? Proposed Google-DoubleClick Merger.
Conflict of Interest in the FTC’s Merger Review
In early December 2007, EPIC learned of a conflict of interest in the Google-Doubleclick merger review involving FTC Chairman Deborah Platt Majoras and the Jones Day law firm. On December 12, 2007, Jones Day’s web site stated that “Jones Day is advising DoubleClick, Inc., the digital marketing technology provider, on the international and U.S. antitrust and competition law aspects of its planned $3.1 billion acquisition by Google, Inc. … The transaction is currently under review by the U.S. Federal Trade Commission and European Commission.”
Chairman Majoras is a former partner of Jones Day. Chairman Majoras’ spouse, John M. Majoras, is a current Jones Day partner, “the Firm’s global coordinator of competition law litigation,” “the Partner-in-Charge of business development in the Washington, D.C. Office” and ” a member of the Firmwide Business Development Committee.” On December 12, 2007, EPIC filed a formal complaint with the Secretary of the Commission requesting that Chairman Majoras recuse herself from the FTC’s review of the Google-Doubleclick merger. Subsequent to the filing of the recusal petition by EPIC, the page on the Jones Day web site that indicated that the firm was representing Doubleclick on the “U.S. antitrust and competition law aspects” of the merger review by the “U.S. Federal Trade Commission” was removed. The web page has never been re-posted.
In its formal complaint, EPIC noted that Chairman Majoras previously recused herself in antitrust matters pending before the FTC when there were similar conflicts of interest with Jones Day. For example, Chairman Majoras recused herself in the FTC’s review of Proctor & Gamble’s acquisition of Gillette “because her former law firm, Jones Day, represented P&G before the Commission, and Majoras’ husband remains an active partner with the firm.” In addition, Chairman Majoras recused herself in the merger review of Valero Energy Corporation and Premcor after Valero retained Jones Day to represent them in the FTC review of the deal. (FTC File No. 051-0145 (2005)). Chairman Majoras also recused herself in the investigation of Federated Department Stores, Inc.’s $17 billion acquisition of the May Department Stores Company.
EPIC observed, in its formal complaint, that the Ethics in Government Act (5 U.S.C. sect. 7301) and associated statutes set out the legal obligations for employees of the federal government. The Office of Government Ethics has established uniform standards of ethical conduct for executive branch officers and employees. The standards address handling financial interests that conflict with an employee’s official duties. These regulations apply to a federal employee’s own financial interests, as well as the financial interests of a member of the employee’s household. The Standards of Ethical Conduct for Employees of the Executive Branch states:
Where an employee knows that a particular matter involving specific parties is likely to have a direct and predictable effect on the financial interest of a member of his household, or knows that a person with whom he has a covered relationship is or represents a party to such matter, and where the employee determines that the circumstances would cause a reasonable person with knowledge of the relevant facts to question his impartiality in the matter, the employee should not participate in the matter unless he has informed the agency designee of the appearance problem and received authorization from the agency designee in accordance with paragraph (d) of this section.
5 C.F.R. 2635.502 (Personal and business relationships.)
EPIC argued that a reasonable person with knowledge of the relevant facts would question the Chairman’s impartiality in this matter because of (a) her prior association with the law firm (Jones Day) representing a client (Doubleclick) before the Commission, (b) her spouse’s current association and financial interest with a law firm representing a client before the Commission, (c) her spouse’s specific expertise in antitrust matters that are at issue in the client’s matter before the Commission, and (d) her spouse’s specific responsibility for “business development in the [firm’s] Washington, D.C. Office.” Furthermore, EPIC explained that recusal would be the only satisfactory option, because: (a) Jones Day (John Majoras’ firm) would benefit from a resolution of the pending matter that is favorable to the firm’s client Doubleclick. The Chairman’s spouse would specifically benefit from a favorable resolution of this matter for his firm’s client because of both his expertise in antitrust and his responsibility for Washington, D.C. business development; (b) the Chairman exercises greater control over the outcome of matters before the FTC than any other Commission employee; (c) the FTC’s Google-Doubleclick review is the most significant review of consumer privacy interests to ever reach the Commission – it concerns the acquisition of the Internet’s largest targeted advertising company by the Internet’s largest search company, and would produce the third largest media firm in the world.
On December 14, 2007, Chairman Majoras issued a formal statement declining to recuse herself from the matter. In the December 14, 2007 statement, Chairman Majoras referred to a determination by the FTC’s Ethics Official regarding her participation in the merger review. On December 20, 2007, the Commission approved the Google-Doubleclick merger 4-1. Chairman Majoras voted to approve the merger without conditions. EPIC subsequently learned that two former FTC employees, Geoffrey Oliver and Michael S. McFalls, are employed by Jones Day as a partner and “of counsel,” respectively.
EPIC’s FOIA Requests and Lawsuit
On December 14 and December 17, 2008, EPIC filed FOIA requests with the FTC for agency records that directly relate to Chairman Majoras’ conflict of interest in the Commission’s Google-Doubleclick merger review. EPIC requested the following public records:
- all communications, policy memoranda, reports, legal assessments and other documents regarding the participation of the law firm Jones Day, any employee or agent of the law firm Jones Day, or any spouse of an employee of the law firm Jones Day regarding the Federal Trade Commission’s investigation, review, consideration, or assessment of the proposed Google-Doubleclick merger. Such review specifically includes any documents, materials, and/or reports where the phrase “Jones Day” appears;
- all communications, policy memoranda, reports, legal assessments and other documents regarding the participation of the law firm Jones Day, any employee or agent of the law firm Jones Day, or any spouse of an employee of the law firm Jones Day regarding the Federal Trade Commission’s investigation, review, consideration, or investigation of consumer privacy complaints. Such review specifically includes any documents, materials, and/or reports where the phrase “Jones Day” appears;
- all communications, policy memoranda, reports, legal assessments and other documents regarding the participation of the law firm Jones Day, any employee or agent of the law firm Jones Day, or any spouse of an employee of the law firm Jones Day regarding the Federal Trade Commission’s investigation, review, consideration, or assessment the enforcement of consumer privacy law. Such review specifically includes any documents, materials, and/or reports where the phrase “Jones Day” appears;
- all communications, policy memoranda, reports, legal assessments and other documents of FTC employee Claudia Bourne Farrell regarding the Google-Doubleclick merger, the investigation of consumer privacy complaints, or the enforcement of consumer privacy laws;
- all communications, policy memoranda, reports, legal assessments and other documents of FTC employee Nancy Judy regarding the Google-Doubleclick merger, the investigation of consumer privacy complaints, or the enforcement of consumer privacy laws;
- the “conflict of interest analysis” referenced in the December 14, 2007, statement of the FTC Chairman entitled “Regarding Recusal Petition for Review of Proposed Acquisition of Hellman & Friedman Capital Partners V, LP (DoubleClick, Inc.) By Google, Inc,” including all documents related to this matter in the possession of: Deputy General Counsel Christian S. White, and FTC General Counsel William Blumenthal.
- all agency records, including memos, email, letters, references in schedule and appointment books, regarding Mr. Geoffrey Oliver’s participation in the review of the Google-Doubleclick matter while at the FTC;
- all agency records that might address any potential conflicts of interest involving Mr. Oliver at any time he was employed at the FTC, including agency rules and guidelines that may have applied to Mr. Oliver; and
- all agency records concerning Mr. Michael S. McFalls, after January 1, 2007, including email, letters, references in schedule and appointment books, as well as any other indication of communication between Mr. McFalls and the Commission.
EPIC urged the FTC to provide the requested agency records as soon as possible because of the records’ relevance to a matter of great public interest – Chairman Majoras’ conflict of interest concerning the Google-Doubleclick merger review. On December 17 and December 18, 2008, the FTC sent letters to EPIC. The letters acknowledged the FTC’s receipt of EPIC’s public records requests, but failed to provide any records or make any substantive response to EPIC’s FOIA requests. On February 12, 2008, EPIC filed an administrative appeal under the FOIA, and subsequently received no response from the FTC. On March 14, 2008, EPIC filed a FOIA lawsuit challenging the FTC’s failure to disclose agency records and failure to comply with the Freedom of Information Act. In response to EPIC’s lawsuit, the FTC disclosed some agency records. However, the FTC failed to immediately disclose other agency records requested by EPIC, including the “conflict of interest analysis” referenced in Chairman Majoras’ December 14, 2007 statement. After months of delay and litigation, the FTC settled with EPIC in July 2008, disclosing the December 12, 2007 conflict of interest analysis, as well as other documents detailing Chairman Majoras’ conflict of interest in the Google/Doubleclick review. EPIC obtained one document, a July 17, 2007 memorandum, that flatly contradicts Chairman Majoras’ claim that “no one at the FTC” knew of the conflict “until the afternoon of Tuesday, December 11, 2007.”
One of the documents disclosed as a result of EPIC’s lawsuit is the subject of EPIC’s FOIA Note #16: “FTC Discloses Conflict of Interest Analysis Involving Jones Day Law Firm.”
EPIC v. the U.S. Federal Trade Commission, Case No. 1:08-cv-00448 (D.D.C. filed March 14, 2008)
- EPIC’s Complaint Against the Federal Trade Commission (pdf)
- FTC’s Answer (pdf)
- EPIC’s Amended Complaint (pdf)
- Settlement (pdf)
- EPIC’s December 14, 2007 Request for Agency Records under the Freedom of Information Act (pdf)
- EPIC’s December 17, 2007 Request for Agency Records under the Freedom of Information Act (pdf)
- EPIC’s February 12, 2007 Administrative Appeal under the Freedom of Information Act (pdf)
- EPIC’s FOIA Note: “FTC Discloses Conflict of Interest Analysis Involving Jones Day Law Firm“
- December 12, 2007 conflict of interest analysis regarding Chairman Majoras’ participation in the merger review
- July 17, 2007 conflict of interest analysis regarding Chairman Majoras’ participation in the merger review