Lawyers at a U.S. regulator plan to recommend that the government try to block Google's proposed acquisition of mobile advertising firm AdMob on antitrust grounds, a source familiar with the matter said.

The staff (at the U.S. Federal Trade Commission) believes there is a significant competitive problem and they are prepared to make a recommendation to sue, the person said, speaking on condition of anonymity.

The source noted that the staff lawyers at the FTC could still change their opinion as negotiations with Google, the world's No.1 Internet search engine, progress.

The move comes as Google, which generated 97 percent of its $23.7 billion in 2009 revenue from advertising, faces a growing list of investigations in the United States and Europe on issues of competitiveness.

Earlier on Tuesday, the Wall Street Journal reported that the FTC has assembled an internal litigation team to prepare for a possible effort to challenge Google's AdMob deal and that it had briefed Congress about its concerns about the deal.

Any recommendation by the FTC staff to sue would still have to go through several more steps, including approval by the director of the FTC's Bureau of Competition as well as by the agency's commissioners, before the government acted, said antitrust lawyers.

Google did not respond to requests for comment. The FTC was not immediately available for comment.

Regulators have been reviewing Google's $750 million deal to acquire AdMob for months. Google announced the deal in November and said in December that it had received a second request for information from the FTC.

For Google, acquiring AdMob would help bolster its ad business on the popular new breed of smartphones like Apple Inc's iPhone and Google's Nexus One.

In January, Apple acquired Quattro Wireless, a mobile advertising firm that provides similar services to AdMob, for an undisclosed amount.

On Tuesday, U.S. Senator Herb Kohl, the chairman of the antitrust subcommittee of the Senate Judiciary committee, sent a letter to the FTC urging close scrutiny of the deal. He noted in the letter that he had not reached a conclusion on whether the FTC should challenge the transaction.

In an earlier statement in response to the Wall Street Journal article, Google said it was continuing to work with the FTC and that there was overwhelming evidence that mobile advertising will remain competitive after this deal closes.

The potential AdMob challenge is the latest example of the increasing regulatory scrutiny which Google has experienced as it has grown. The U.S. Department of Justice has challenged Google's settlement with book publishers and authors' groups that would allow the search giant to create an online digital library.

In February, Google said that European regulators were looking into complaints from three companies, one owned by Google rival Microsoft, about Google's search ranking practices.

(Reporting by Alexei Oreskovic; Editing by Valerie Lee)

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