Antitrust Officials To Probe Microsoft-Yahoo Partnership
Microsoft and Yahoo’s new Internet search partnership faces a tough antitrust review in the U.S. and overseas, as regulators must decide whether the deal will foster more competition with market leader Google, The Associated Press reported.
Yahoo and Microsoft announced the deal on Wednesday, and executives believe it may have a better shot at success than the proposed agreement that fell apart last year after the Justice Department threatened to block it, ultimately leading Yahoo to revive talks with Microsoft Corp.
Evan Stewart, an antitrust lawyer at Zuckerman Spaeder, said Yahoo’s alliance with Microsoft could have an easier path because antitrust regulators are tougher on deals involving the top two companies in an industry.
comScore Inc. shows that Google is by far the leading search engine with two-thirds of the U.S. search market, while Yahoo is well ahead of Microsoft for the next two spots.
However, one key lawmaker on antitrust issues said Wednesday that the agreement "warrants our careful scrutiny."
Lawmakers will review the deal because of the potentially far-reaching consequences for consumers and advertisers as well as concern about dampening the innovation we have come to expect from a competitive high-tech industry, according to Sen. Herb Kohl, a Wisconsin Democrat.
Present Barack Obama has pledged to see that antitrust enforcers subject deals to more rigorous review than the Bush administration.
Herbert Hovenkamp, an antitrust law professor at the University of Iowa, told AP that he is expecting tough scrutiny in the U.S. and even tougher in the European Union.
European regulators have historically taken a harder line against Microsoft than their U.S. counterparts in their reviews of the software company’s dominance in other products, like Windows and Internet Explorer, Hovenkamp noted.
Spokespersons from both the Justice Department and the Federal Trade Commission declined to comment on the deal.
The new agreement will allow Yahoo to use Microsoft’s search engine, Bing, on its Web portal, significantly expanding Bing’s reach. Yahoo will in turn keep 88 percent of the revenue from search ads for the first half of the 10-year deal.
Yahoo and Microsoft released a joint statement saying they expect the agreement to be "closely reviewed by the industry and government regulators" and insist their partnership will lead to better choices for consumers and advertisers.
Hovenkamp said the key concern would be whether regulators accept Microsoft CEO Steve Ballmer’s argument that the deal will create a stronger competitor against Google.
"In the past, that defense hasn’t worked all that well," Hovenkamp said, and courts have shot down deals between the second- and third-largest players in other industries.
However, the deal should pass muster because it will provide "real competition" to Google, according to Stewart.
But many privacy advocates have come out strongly against the agreement.
A thorough examination of the partnership’s consumer data collection policies, as well as privacy and online ad business practices, were called for by the Center for Digital Democracy, an online privacy advocate in Washington that opposed the Google-Yahoo partnership last year.
The deal has also been opposed by the U.S. Public Interest Research Group, which also came out against the Google-Yahoo partnership.
Amina Fazlullah, media and telecom legislative counsel for the Washington, D.C.-based group, warned that the Microsoft-Yahoo deal should serve as a red flag.
"When we lose independent search competitors, then we lose the ability to have multiple competitors working to preserve privacy," she said.
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