Microsoft, Google Come Out Lobbying

By Jeffrey H. Birnbaum
Washington Post Staff Writer
Tuesday, February 5, 2008

Microsoft has begun lobbying Congress even before its $44.6 billion bid for Yahoo has been accepted, while Google, the real object of Microsoft's concern, has started to raise objections on Capitol Hill.

Top Microsoft executives, including General Counsel Brad Smith and Jack Krumholz, head of the company's Washington office, contacted the offices of key lawmakers on Friday, one day after the unsolicited bid for Yahoo was announced.

The company's approaches, made by e-mail and phone, were largely informational, according to congressional aides. The executives explained what the bid was and what advantages they saw in its completion. They also said they wanted to come in later to talk about the transaction at greater length, especially in advance of any hearings on the subject.

In lobbying parlance, this is known as "checking the boxes" -- meticulously informing powerful congressmen and senators about a transaction they might want to weigh in on down the road. Lobbyists live by the rule that when it comes to senior government officials, surprises should be avoided at all costs.

Google's lobbying, on the other hand, was unusual because the company is not involved in the proposed acquisition. Still, lobbyists for the Internet search engine, which has raised its misgivings in public pronouncements, spotlighted those objections for lawmakers and their aides over the past few days, congressional staffers said.

Microsoft's bid for Yahoo is an effort by the software giant to compete for search and online ad dollars with Google, which dominates both forms of advertising.

Washington decision makers are gearing up for what could be a major policy and legal battle over Microsoft's surprise offer. Technology industry executives and consumer advocates are pressing officials to think hard about the merger, which may have major antitrust and privacy implications.

In response, congressional committees are preparing hearings, and administration officials are making plans to investigate the transaction. The House Judiciary Committee has scheduled a hearing for Friday on "The State of Competition on the Internet." In the Senate, the Judiciary Committee's antitrust subcommittee expects to hold a hearing if the deal goes through.

Should the companies agree to the transaction, the Justice Department has made clear it would review the merger for potential anticompetitive implications. "We'd be interested in looking at it," said department spokeswoman Gina Talamona.

Yahoo has not yet made its presence felt in official Washington circles, according to congressional aides. A spokeswoman for Yahoo would say only, "Yahoo's board is carefully and thoroughly evaluating the Microsoft proposal in the context of all of the company's strategic alternatives."

Spokesmen for Microsoft and Google declined to comment.

Consumer groups, however, were getting ready to speak out against Microsoft's bid. Jeff Chester, executive director of the Center for Digital Democracy, said his group and the U.S. Public Interest Research Groups plan to complain to the Federal Trade Commission that the combination of Microsoft and Yahoo poses a risk to individuals' privacy rights. He said the groups will also urge Congress and the Justice Department to block the buyout.

"The danger is that by combining their platforms, the companies will be able to have a vast storehouse of information, of detailed dossiers on users that they can access without an individual's consent or awareness," Chester said.

The groups made a similar objection to the merger of Google and the online advertising company DoubleClick, but the FTC approved the merger in December.

Microsoft, aware of the consumer groups' wariness on the privacy issue, began a campaign to win them over. After the bid was announced, a Microsoft executive sent an e-mail Friday to several consumer advocacy organizations.

It read in part: "Some of you have raised privacy concerns and may have questions about how consumer data might be treated. We'd be happy to discuss any issues you may have related to this deal. Microsoft has been at the forefront of privacy over the last few years, including support for a federal privacy bill. . . . Our strong views that privacy is important and needs to be protected have not changed. We will work to ensure that consumer privacy continues to be protected moving forward."

© 2008 The Washington Post Company