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Microsoft-Yahoo deal may fall foul of DoJ

Attorney expects govt to ask for deal to modified

Microsoft and Yahoo's new search deal could run into trouble as it will narrow the search engine market, says an antitrust lawyer.

Matthew Cantor, a partner at Constantine Cannon, said that when Yahoo's own search tool disappears, only two major search engines will remain - Google and Microsoft's Bing.

"I obviously can't predict with certainty how the DoJ [Department of Justice] will react to it, but I think there's a very good chance it will force [Microsoft and Yahoo] to modify the deal at the very least if they do not block it outright," said Cantor, who has litigated several major antitrust cases.

"Even though it's a partnership, it will be evaluated like a merger ... because Yahoo ceases to be a competitor in search. Yahoo is going to use Bing technology for their sites. I think there's no question the DoJ will come to the conclusion that the deal is anticompetitive."

Cantor noted that concerns in the antitrust division at the US DoJ killed a proposed advertising partnership between Google and Yahoo last year. He predicted that the proposed Microsoft-Yahoo deal will meet the same fate.

Microsoft officials contend that the company's long-anticipated deal with Yahoo will improve competition in the search market.

Jonathan Kanter, a partner at Cadwalader, Wickersham & Taft and outside counsel for Microsoft, said Google has a near monopoly in online search and needs a strong competitor like a combined offering from companies like Microsoft and Yahoo.

"Our view is that Google is the dominant player in this space by a long shot," said Kanter, who added that the firms expect the deal to close by mid 2010.

"When you have a market like this with one dominant player, advertisers and others are starving for more competition. If both companies separately don't have the scale to effectively compete against Google, combined they will create a more credible alternative - and one that will attract more advertisers. At the end of the day, what matters is the effect on competition."

Yahoo told PC Advisor's sister publication Computerworld that the deal with Microsoft is aimed at boosting search competition. "We are confident in the merits of the deal and look forward to working with regulators throughout the process," said a Yahoo spokesman.

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See also: Microsoft-Yahoo deal not good for consumers


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