Thursday, July 30, 2009

Calls for Antitrust Review of Microsoft’s Search Agreement with Yahoo! Begin

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Yesterday, Microsoft Corporation and Yahoo! Inc. announced their plans to join forces to compete with Google in the Internet search and online advertising markets. Although neither the Federal Trade Commission nor the Department of Justice Antitrust Division have commented on the 10-year partnership between Yahoo! and Microsoft, there is already reaction on Capitol Hill.

“The deal between Yahoo and Microsoft--industry giants and direct competitors in Internet advertising and search markets--warrants our careful scrutiny,” said Senator Herb Kohl of Wisconsin. Kohl, who is chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, said the ”Subcommittee is concerned about competition issues in these markets because of the potentially far-reaching consequences for consumers and advertisers, and our concern about dampening the innovation we have come to expect from a competitive high-tech industry. The implications of this proposed joint agreement will be closely reviewed by my Subcommittee."

According to the companies’ July 29 announcement, “Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers.” For 10 years, Microsoft's Bing will be the exclusive search platform for Yahoo! sites. Microsoft will acquire an exclusive 10 year license to Yahoo’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing web search platforms, the companies explained. Full implementation of the agreement is expected within 24 months of regulatory approval.

Although the announcement does not mention Google by name, the companies said that by “providing a viable alternative to advertisers, this deal will combine Yahoo! and Microsoft search marketplaces so that advertisers no longer have to rely on one company that dominates more than 70 percent of all search.”

Consumer Group Reaction

Consumers groups, such as Consumer Watchdog, are also calling for FTC and Justice Department scrutiny of the agreement. Consumer Watchdog is asking for a thorough review “to ensure that there are no antitrust violations and that user privacy is guaranteed.”

Justice Department Response to 2008 Yahoo!/Google Proposal

The Microsoft/Yahoo! deal comes just eight months after the Antitrust Division scuttled an Internet advertising agreement between Yahoo! and Google. On November 4, 2008, the Department of Justice announced that Yahoo! Inc. and Google Inc. abandoned their proposed advertising agreement after they were informed that the government would file an antitrust lawsuit to block the implementation of the agreement. In its announcement, the Justice Department said that, “if implemented, the agreement between these two companies accounting for 90 percent or more of each relevant market would likely harm competition in the markets for Internet search advertising and Internet search syndication.” The text of the Justice Department's November 4, 2008, announcement appears at CCH Trade Regulation Reporter ¶50,234.

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