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Google Ad Deal Is Under Scrutiny

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By Peter Whoriskey
Washington Post Staff Writer
Wednesday, July 2, 2008

The Justice Department has opened a formal antitrust investigation into a deal struck last month that would allow Internet titan Google to provide some search advertising for Yahoo, according to sources familiar with the inquiry.

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Investigators are planning to demand documents not only from Google and Yahoo, but also from other large companies in the Internet and media industries, said the sources, who spoke on condition of anonymity because the investigation is ongoing.

Google and Yahoo officials have said since the deal's announcement that they would delay its implementation for a voluntary Justice Department review. But a formal investigation signals that the department may have found some cause for concern.

"There is nothing unexpected in the review of this arrangement as structured by the parties and Department of Justice officials," Yahoo said in a statement, expressing confidence that the deal would be good for competition. Officials with Google and the Justice Department declined to comment.

But lawyers familiar with similar investigations said that the kind of legal requests being issued by the Justice Department in this case -- "civil investigative demands" -- are not used for routine matters.

"They don't do it without having identified significant issues," said M.J. Moltenbrey, a Freshfields Bruckhaus Deringer lawyer who was director of civil non-merger enforcement in the Justice Department's antitrust division in the 1990s. "It involves approval at higher levels within the antitrust division."

"It doesn't mean they have drawn any conclusions," said Peter Guryan, a partner with Fried Frank and formerly an antitrust lawyer in the Justice Department. But "it is a significant step beyond a request for voluntary information," he said. "It demonstrates that the DOJ clearly has questions."

The investigation arises as a high-stakes fight is underway to control Internet advertising, and, by extension, the content it supports.

Google, according to its competitors and critics, could gain a monopoly in Internet advertising if the deal with Yahoo is permitted.

One of the largest chunks of Internet advertising today is "search advertising," or the ads that run alongside Internet search results delivered by the major search engines: Google, Yahoo and Microsoft.

Google's is the dominant search engine, while Yahoo's and Microsoft's efforts run a distant second and third.

Under the Google-Yahoo deal, announced June 12, Google would provide search advertising to Yahoo for some, but not all, Yahoo searches in the United States and Canada.


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