Yahoo-Google test gets scrutiny
Yahoo Inc.’s short experiment with outsourcing some of its Web-search ads to Google Inc. has drawn scrutiny from antitrust regulators, the companies said Wednesday.
Yahoo and Google said they had provided the Justice Department with unspecified information in response to questions about the two-week test, which was designed to explore how a possible collaboration could help Yahoo thwart Microsoft Corp.’s takeover bid.
Microsoft is busy planning its next move in the buyout fight for Yahoo. People familiar with the company’s strategy said Microsoft did not expect to reach a deal before the Saturday deadline it set for Yahoo to accept the unsolicited bid, so the software giant intends to launch a proxy fight next week and nominate candidates for Yahoo’s board.
But the people, who requested anonymity because of the sensitivity of the talks, said they didn’t expect Microsoft to carry out its less explicit threat to lower its offer price. A lowered price might antagonize the Yahoo shareholders to whom Microsoft would be appealing in the proxy fight.
Microsoft is likely to address at least the timing of its future moves today, when it announces quarterly earnings.
Yahoo management doesn’t want to sell to Microsoft. It has sought alternatives, including trying to boost the profitability of its search-engine advertising by outsourcing some of its results to market leader Google. Yahoo said the test, which ended Wednesday, would involve no more than 3% of its search results.
But any combination of Google and Yahoo, the top two search engines, raises antitrust concerns.
The extent of the inquiry by the Justice Department was unclear Wednesday. Neither Google nor Yahoo would say what type of questions the antitrust regulators asked.
Justice Department spokeswoman Gina Talamona would say only that the agency was “aware of the collaboration.”
In an e-mailed statement, Google spokesman Adam Kovacevich said, “We informed the Justice Department before we launched this test, and we have been responsive to their questions about it.”
Yahoo spokeswoman Tracy Schmaler said the company “proactively kept the Department of Justice informed of its intention to conduct this limited test with Google and has provided information to [the] DOJ on the nature of the test.”
Google conducted 59.8% of all U.S. searches last month while Yahoo had 21.3%, according to research firm ComScore Inc. When they announced their test, Microsoft complained that any “definitive agreement” between Google and Yahoo would make the search advertising market “far less competitive.”
“It’s easy to see how there would be antitrust questions about something like that,” said Gary Reback, an antitrust attorney who persuaded the Justice Department to pursue its landmark antitrust case against Microsoft in the 1990s. “On the other hand, are those bigger than having Microsoft acquire Yahoo?”
When the software giant made its unsolicited bid for Yahoo in February, the department said it would review the deal if it was completed.
Robert E. Litan, a senior fellow at the Brookings Institution and an antitrust official in the Clinton administration, said the Justice Department might be looking into the possible implications of a long-term collaboration between Google and Yahoo. An investigation into a short-term arrangement is unusual, he said, but the length does not matter under antitrust law.
“If two people or three people get in a room and just temporarily price-fix . . . that would be against the law,” he said. “There’s no immunity just because it’s a short-term deal.”
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jim.puzzanghera @latimes.com
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Puzzanghera reported from Washington and Menn from Los Angeles. Times staff writer Jessica Guynn in San Francisco contributed to this report.
