Microsoft
The request means regulators will do a more extensive examination, rather than approve the deal immediately. Microsoft predicted an in-depth review when the accord was announced in July, said company spokesman Jack Evans. He declined to comment on the contents of the request.
Over the course of the review, the companies expect to be asked about their search-engine investments, ad pricing and product plans, a person familiar with the matter said.
The outcome will shape the future of the market for Internet search ads, where Google has triple the U.S. sales of its two rivals. The companies may face more difficulty proving the deal wont hurt competition as regulators step up oversight of the technology industry, said Michael Katz, a former chief economist in the Justice Departments antitrust unit.
“The antitrust agencies are pretty skeptical of the argument that you need to be bigger to compete,” said Katz, now a professor at the University of California at Berkeley. “The Justice Department will respond, Why cant you get bigger by competing?”
Under the partnership, signed in July, Yahoo will use Microsofts Bing search engine on its Web sites. Yahoo will sell ads that appear next to Web-search results, with the companies splitting the revenue.
Bing Investment
Even though the antitrust agency will scrutinize the deal closely, the companies probably can get it done as long as they do enough to persuade the Justice Department that the agreement doesnt hurt competition, Katz said.
During the Justice Departments review, Redmond, Washington-based Microsoft expects to be asked to disclose its spending on Bing to ensure the company made enough investments to create a viable product, the person familiar with the matter said. Both companies also anticipate regulators will ask for their individual search-engine product plans so it can assess whether theres an incentive to compete more or less vigorously as a result of the deal.
“Those plans will help the DOJ understand what the competitive impacts of the merger might be,” said Greg Neppl, an antitrust lawyer at Foley & Lardner LLP in Washington. If the department were to find the accord hinders innovation, it could seek to block the deal.
Ad Pricing
The government will also seek information on how the companies online-ad auctions operate and what might happen to prices as a result of the combination, the person said. While regulators will investigate pricing, its unlikely that they will dictate what prices will be, the person said.
“Google was dominant a year ago and is dominant today,” said Brad Smith, Microsofts general counsel. “Even if this is approved, Google will be dominant a year from now — but if this agreement is approved, at least there is a chance for a more credible No. 2 to emerge.”
Laura Sweeney, a spokeswoman for the Justice Department, said the agency is aware of the proposed Microsoft-Yahoo partnership, and declined to comment further.
Fully Cooperating
“Yahoo and Microsoft are cooperating fully with the Justice Department and firmly believe that the information they will be providing will confirm that this deal is not only good for both companies, but it is also good for advertisers, good for publishers and good for consumers,” Adam Grossberg, a Yahoo spokesman, said in an e-mail.
The companies are now responding to the latest request, which they received earlier this week, Microsofts Evans said yesterday. They still expect the deal to close on schedule.
Microsoft rose 22 cents to $25 yesterday in Nasdaq Stock Market trading. Sunnyvale, California-based Yahoo added 67 cents to $15.45, while Google advanced $6.97 to $470.94. Microsoft has risen 29 percent this year, compared with a 27 percent gain at Yahoo and a 53 percent jump for Google.
“There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users,” Google spokesman Adam Kovacevich said in an e-mailed statement. “Were interested to learn more about the deal.”