Google’s Motorola Mobility Takeover May Survive U.S. Regulatory Scrutiny

Google Inc. (GOOG) may need to make concessions to win Justice Department approval of its planned acquisition of Motorola Mobility Holdings Inc., antitrust lawyers and analysts said.

The Justice Department may attach conditions to its consent for the $12.5 billion deal to ensure that Google, maker of Android mobile phone software, doesn’t use any of Motorola’s patents to hurt competition in the smartphone market, the analysts and lawyers said. The government might require Google to license some of those patents to rivals, they said.

“All the antitrust authorities are interested in Google nowadays,” said Harry First, a law professor at New York University. The planned purchase will probably be approved in the end after being “closely looked at” by the Justice Department, he said.

The deal will spur another avenue of inquiry for the Federal Trade Commission to examine Google’s business as part of its broad antitrust probe of the company, said Frank Newell, a former Justice Department trial attorney.

“If the government were concerned about market power in a certain area, then on the margin, this would increase their market power,” said Newell, the co-chair of the antitrust practice group at Cozen O’Connor in Philadelphia.

Competitors’ Applications

The agency is investigating whether Google discouraged makers of smartphones, which can surf the web and play videos, from using competitors’ applications with its Android operating system, said a person familiar with the investigation.

In a Massachusetts state court case, Boston-based Skyhook Wireless Inc. claims Google pressured Motorola Inc. and other Skyhook customers not to use the Boston-based company’s software for pinpointing a cell phone’s location. Mountain View, California-based Google makes a competing application.

Google said Samsung Electronics Co. and Android-phone manufacturers Sony Ericsson Mobile Communications AB and LG Electronics Inc. (066570) support the transaction.

As long as Google allows device makers and software developers to run their products with Android, the company shouldn’t have antitrust problems, said David Balto, a Washington-based antitrust attorney.

‘Spur Innovation’

The acquisition will “really spur innovation and competition in the mobile device market,” he said.

David Drummond, Google’s chief legal officer, said on a conference call with analysts that the acquisition will get the nod from regulators.

“We believe very strongly this is a pro-competitive transaction,” he said.

The company expects the review will be completed by early next year, according to a statement.

Reviews of Google’s purchases of AdMob Inc. and DoubleClick Inc. took nine to 11 months to close, said Mark Mahaney, an analyst at Citigroup Inc. in San Francisco.

“Given the recent transactions that Google has had, I think that’s a pretty aggressive timeline,” he said in an interview on Bloomberg TV.

Under an agreement between the two antitrust agencies, the Justice Department will handle all reviews of Google acquisitions while the FTC conducts its broader probe, two people familiar with the matter said. The Justice Department also traditionally handles telecommunications mergers.

Gina Talamona, a Justice Department spokeswoman, declined to discuss whether the agency was reviewing the Motorola acquisition.

European Unions

The deal also will be examined by European Union investigators conducting an antitrust investigation of Google, said Thomas Vinje, chairman of the Global Antitrust Practice at Cifford Chance in Brussels.

“The question of whether Google would be leveraging its current dominance” as owner of the world’s most popular Internet search engine to create similar market power on mobile devices will be on European Union officials’ minds when looking at the deal, he said in an interview.

To contact the reporter on this story: Jeff Bliss in Washington at jbliss@bloomberg.net

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net; Michael Hytha at mhytha@bloomberg.net.

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