Yahoo bid pits 2 titans in lobbying war
After sparring for two years over antitrust issues, Microsoft Corp. and Google Inc. are preparing for the main event: a lobbying showdown over the fate of Yahoo Inc.
Google, which has bulked up its presence in the nation’s capital, has started raising concerns about the antitrust implications of Microsoft’s proposed $44.6-billion takeover of Yahoo. Analysts said it could ask regulators to stop the deal.
At the very least, Google could try to get conditions placed on the deal or delay approval until a new federal administration that may be less friendly to corporate mergers takes office in January.
“This is going to be a hard-fought battle,” said Robert E. Litan, a senior fellow at the Brookings Institution and an antitrust official in the Clinton administration.
One battleground could be Capitol Hill. Congress has no formal role in approving corporate deals, but it can spotlight them by holding hearings, potentially delaying regulatory action. Key lawmakers are already expressing concerns about a loss of competition on the Internet and its effect on users’ privacy. Microsoft has begun reaching out to them and to consumer advocates.
The House antitrust task force will hold a hearing Friday, and the chairman of the Senate’s antitrust subcommittee has promised to do the same if Yahoo accepts Microsoft’s offer (Yahoo’s board of directors says it’s weighing its options). On Tuesday, leaders of the House panel on commerce, trade and consumer protection said they planned to look into competition in the growing online advertising field.
But Google faces an uphill battle in Washington in its effort to prevent a Microsoft takeover of Yahoo, analysts said.
The Bush administration has tried to stop few major mergers. Plus, antitrust regulators pay more attention to complaints from a corporation’s customers and the public than to objections from companies that would benefit by preventing their rivals from joining forces.
Microsoft learned that lesson when it lobbied hard last year to stop Google’s purchase of online advertising firm DoubleClick Inc. The Federal Trade Commission approved the deal anyway, and the European Union appears likely to do the same.
Instead of trying to block a deal, Google could have more success pressuring regulators to attach conditions that prevent Microsoft from tying its dominant Windows software to Yahoo services such as instant messaging and free e-mail, said Blair Levin, an analyst with brokerage Stifel, Nicolaus & Co. Preferential tying of Microsoft products to Windows is prohibited under a 2002 settlement of federal and state antitrust cases against the software giant.
Microsoft and Google have been jousting over antitrust issues since 2006. Google complained to the Justice Department that a feature in Microsoft’s dominant browser, Internet Explorer, gave an advantage to Microsoft’s search engine, but officials dismissed the claim. Last year, Google filed a similar complaint about the desktop search feature in Microsoft’s new Vista operating system, leading Microsoft to make changes.
The real battle began last year, when Google announced its plan to acquire DoubleClick. Microsoft took the lead among Google’s competitors in pushing regulators to reject the deal, arguing it would give Google too much power in online advertising. The FTC dismissed those concerns in approving the combination but warned that it would watch that market closely.
A Microsoft-Yahoo case would be handled by the Justice Department because of its antitrust history with the software giant dating to the 1990s.
Microsoft and Google declined to comment on their lobbying activities.
The states could set another roadblock. Many states have sued Microsoft over antitrust issues in the past and are paying close attention to how it handles the Yahoo bid. Though they usually don’t get involved in merger reviews, it has happened before, such as when Connecticut tried to stop Oracle Corp.’s hostile takeover of PeopleSoft Inc.
An attorney working for the states said they had no plans to complain before the federal judge overseeing Microsoft’s compliance with the settlement that resolved the main antitrust case. But he said the states could argue within a traditional Justice Department merger review, or on their own in court, that Microsoft should be barred from bundling Yahoo’s consumer products with its Windows operating system.
A spokesman for California Atty. Gen. Jerry Brown said he was monitoring the matter.
Microsoft has been pondering how various antitrust arguments, both against it and against a potential Yahoo alliance with Google, would play out. Some of its public declarations already suggest an emphasis on downplaying the market strength of a combined Microsoft and Yahoo.
For example, Microsoft Chief Executive Steve Ballmer told Wall Street analysts Monday that even in the U.S., a combined Microsoft and Yahoo would have only about 20% of the consumer market for e-mail.
“We have a lot of mail users, and so does Yahoo,” he said in answering an analyst’s question. “But if you put them all together, you probably don’t have 20% of consumer e-mail on the Internet in the United States.”
Yet Web measurement firm Comscore said Tuesday that their combined e-mail offerings reached about 106 million of the 142 million people who use Web-based e-mail -- about 75% of the market.
Microsoft spokesman Jack Evans said Ballmer had included not just free e-mail services but all Internet-based e-mail accounts, including those from paid providers such as Time Warner Cable.
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joseph.menn@latimes.com
