Page 2 of 2   <      

Google Ad Deal Is Under Scrutiny

The two would share the advertising revenue, with Yahoo estimated to receive as much as $800 million annually from the agreement.

By proposing to unite the two biggest players in search advertising, however, the agreement quickly aroused critics who said the move would allow Google to become a monopoly for advertising in the new medium.

Shortly after the announcement, the heads of key subcommittees in the House and the Senate reiterated their intentions to look into the Google-Yahoo arrangement.

Even so, attorneys for Google have appeared confident that they could convince Justice Department reviewers, as well as congressional committees, that the deal would be good for consumers.

"We do feel that it is a pro-competitive deal," said Google's general counsel, Kent Walker.

In Google's view, consumers and advertisers would benefit from the deal because Google's method of determining what ads to place beside a search query is the best in the industry.

If Google is allowed to provide the ads for a Yahoo search, consumers will see more relevant ads and advertisers will realize a better return for their ad spending, Google officials have said.

Moreover, they said, competitors in other industries have reached agreements that have passed muster with regulators.

"Toyota sells its hybrid technology to General Motors, even though they are the number one and number two car manufacturers globally," Omid Kordestani, a Google senior vice president, noted in a blog post. "Canon provides laser printer engines for HP, despite also competing in the broader laser printer market. Google and Yahoo will continue to be vigorous competitors, and that competition will help fuel innovation that is good for users."

But critics and competitors of Google -- chief among them Microsoft -- have argued that the deal will limit choices for advertisers and render Yahoo less likely to compete against Google.

Asked whether Microsoft has been issued a demand for information in the investigation, a company spokesman declined to comment.

"This is a complicated situation, but one of the key questions is very simple," said David Balto, an antitrust lawyer who was competition policy director at the Federal Trade Commission during the Clinton administration. "What is Yahoo's incentive to continue to compete?"

<       2

© 2008 The Washington Post Company