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EU, US looking at MSFT-YHOO search deal: Is competition for GOOG anticompetitive?

EU regulators are also looking at the Google competitors search-marketing alliance. Does this mean trouble or is it just a pro forma review of a very big deal?
Written by Richard Koman, Contributor

A friendly chit-chat is always nice, but not when antitrust regulators want to talk. And regulators in both the U.S. and Europe are interested in talking with Microsoft and Yahoo over their combined search operations.

Reuters reported today that the EU is talking to the companies.

"There are ongoing informal discussions between the European Commission and Microsoft and Yahoo on their search engine partnership," (a) source said, without giving further details.

In the U.S., Justice Departments antitrust regulators are also looking at the deal, the companies confirmed on Friday. This is perfectly appropriate and expected, Microsoft spokesman Jack Evans said:

As expected, we received additional request for information about the agreement earlier this week. When the deal was announced, we said we anticipated a close review of the agreement given its scope, and we continue to be hopeful that it will close early next year.

I certainly believe that Microsoft expected a review, but Matthew Cantor, a partner at Constantine Cannon in New York, said the review is not pro forma:

Most deals clear without a request for additional information. This is not run-of-the-mill. The government believes there are potential antitrust concerns raised here. They would only request additional information if there was some kind of presumption that the deal will cause antitrust effects.

Even if it does cause "antitrust effects," wouldn't the end result be a stronger competitor for Google? Clearly. That would be good for consumers and business. I tend to agree with Microsoft that any deal of this import must be examined. If this were the SEC, perhaps they wouldn't bother but the Justice Dept. seems to be actually doing its job. I don't see that that means it's in trouble.

Computerworld's Preston Gralla argues that, without this deal, Yahoo's existence is tenuous, so anyway you cut it there will two major competitors in search advertising: Google vs. Microsoft or Google vs. Microsoft/Yahoo.

Combined, Yahoo and Microsoft may give Google some competition; separately they can't. So, in fact, the deal may eventually make the search market more competitive, not less. The biggest anti-competitive danger to search is the market leader, Google, not Microsoft and Yahoo. If the feds squash the Microsoft-Yahoo deal, they'll only make sure that Google becomes even more dominant.

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