Google-Yahoo Deal Raises Antitrust Fears

Google, already the world's dominant Web company, keeps on growing.

But the announcement on Thursday that it has struck a deal to assume some of the business of its nearest competitor, Yahoo, has aroused questions about whether the company is on its way to becoming a monopoly for advertising in the new medium.

Yesterday, the heads of key subcommittees in the House and the Senate reiterated their intention to look into whether the Google-Yahoo arrangement would diminish competition.

Google is the runaway leader in Internet search advertising in the United States; Yahoo is a distant second.

Under the terms of the deal, Google would provide the ads for an undisclosed portion of Yahoo's search queries in the United States and Canada. Search advertising is the largest source of U.S. Internet advertising revenue.

The deal "is yet another example of the rapid changes in this market, and further underscores the need for close scrutiny," Rep. Bobby L. Rush (D-Ill.), chairman of the Commerce subcommittee on commerce, trade and consumer protection, said in a statement yesterday.

Sen. Herb Kohl (D-Wis.), chairman of the Judiciary Committee's antitrust panel, said his subcommittee would investigate the "competitive and privacy implications of this deal."

Although there are no requirements that the deal win government approval, lawyers for Google and Yahoo are working with the Justice Department to work out any concerns. They notified the Justice Department before they began testing the agreement earlier this year.

"Our sense is that by the end of the review, they'll be comfortable with the process," Kent Walker, Google's general counsel, said yesterday. "We do feel that it is a pro-competitive deal."

Among other things, Google has pointed out that competitors in other industries often cooperate on some efforts while maintaining a healthy competitive relationship. Moreover, it noted that the deal is not exclusive in that Yahoo could partner with another company to provide search advertising.

But a source familiar with the Senate subcommittee's views said some of those arguments are "right in theory, but wrong in practice."

The source spoke on condition of anonymity because the investigation is just beginning.