Google-Yahoo Partnership Faces Regulatory Review in California

On June 12, Yahoo (YHOO) in a move to thwart Microsoft’s (MSFT) takeover attempts said it would run ads supplied by Google (GOOG) alongside search query results, in a four-year deal estimated to bring the Web Portal up to $800 million in revenue a year. While the June partnership benefited Yahoo by derailing Microsoft’s acquisition efforts – the sole winner of the agreement was clearly Google. If the deal is made definitive, the Internet search giant would gain more power over the search advertising market and together with Yahoo, as the No. 1 and No. 2 search engines on the Web, will consolidate over 90% of the market between them.

SFGate is reporting that the U.S. Justice Department and the California attorney general Jerry Brown’s office have agreed to share documents regarding a possible antitrust suit against Google over its Yahoo deal.

The documents by the U.S. Justice Department, according to a letter Brown’s office sent last month to Assemblyman Joel Anderson, a Republican from El Cajon, will be made available to the attorney general through “a confidential online document repository”. So far eleven state attorneys general are examining the partnership, including Florida and New York, Anderson said in an interview.

In July Anderson wrote Brown asking for an investigation.

We’re talking about giving (Google and Yahoo) over 90 percent market share – nobody else on the Web has a database like that,” Anderson said. “Who can compete?

Many agencies and big advertisers have expressed similar concerns, saying that the deal will give both co.’s a massive monopoly, not just in the U.S. but in the global market as well. Microsoft also is doing all it can to prevent the deal from happening.

Microsoft has been lobbying reporters to write about this stuff. They have a huge lobbying apparatus in place from the antitrust battles of the ’90s. Some very high up people at [media] holding companies don’t even think it’s worth their time to get involved because it’s a lobbying battle. And for agencies, they know they’re being used, but they think Google need to get its snout hit. [Valleywag]

Since reaching their partnership agreement, both Yahoo and Google have consistently implied the two co.’s are not merging, and the deal is not exclusive for either party, so the partnership does not need upfront approval from the authorities. While their argument in legal terms has merit, if the deal is considered as “anti-competitive” – it could be stopped or modified to ensure fairness ; steps that the U.S. Justice Department seems to be currently contemplating.

Yahoo’s director of global public affairs, Tracy Schmaler, confirmed news reports on Sept. 10 that the Justice Department is seeking advice from an outside consultant.

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