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Google Says Yahoo Sale Could Stifle Competition

By Peter Whoriskey
Washington Post Staff Writer
Monday, February 4, 2008

Google executives are urging trade regulators around the world to look closely at Microsoft's bid to buy Yahoo, a $44.6 billion proposal that they say threatens to quash competition, stifle Internet innovation and shrink consumer choice.

The company issued its first public statement on the Microsoft deal yesterday, its first shot in what is expected to be a prolonged struggle between tech titans Google and Microsoft.

Microsoft has run afoul of antitrust regulators because of its dominance and tactics in the PC market, Google's statement noted. Now, with Microsoft proposing to buy Yahoo and extend further into online business, it could act again to stifle competition on the Internet, Google said.

"Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets," David Drummond, Google's chief legal officer, warned in a statement released yesterday. "Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operation systems to the Internet?"

On Friday, Microsoft announced that it had offered to buy Internet behemoth Yahoo for $44.6 billion, an acquisition that would unite the world's most influential software company with the Web's most-trafficked site.

Microsoft sells the operating systems and Web browser used on the vast majority of the world's computers. The proposed acquisition would give Microsoft access to Yahoo's 137 million monthly visitors and long reach into the lives of Internet users.

If approved by Yahoo's shareholders, the deal would then face review by antitrust regulators.

Consumers and policymakers should consider that the combination of Microsoft and Yahoo would have an "overwhelming" share of the market in instant messaging and Web e-mail accounts, the Google statement noted. That dominance, it suggested, would curtail innovation in those services, limiting consumer choice.

But Microsoft officials countered yesterday that the deal would enhance competition because it would help Microsoft compete against Google in Internet-search advertising, where it is dominant.

Google has the Internet's preeminent search engine and control of its related advertising, and is also branching out in many directions: into office software; mobile phones; and through its purchase of YouTube, entertainment.

"The combination of Microsoft and Yahoo! will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising," Brad Smith, Microsoft's general counsel, said in a statement released yesterday. "The alternative scenarios only lead to less competition on the Internet."

Yahoo said Friday that it would evaluate the offer "carefully and promptly in the context of Yahoo's strategic plans." Its representatives declined further comment.

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