Consumer Advocates Exhort DOJ, FTC to Scrutinize Microsoft-Yahoo Deal

John Simpson, an advocate with non-profit group Consumer Watchdog, also said the Microhoo deal must be closely scrutinized by the Federal Trade Commission, the Justice Department and the European Commission to ensure that there are no antitrust violations and that user privacy is guaranteed.

"If the result of this deal is that there are two stronger Internet search enterprises who exploit users' data at the expense of their privacy rights, consumers are worse off, not better," said Simpson. "Users must have control of their data—whether it is collected and how it is used. Guarantees of that control must be in place before this deal is approved. Justice and the FTC can—and must—insist on this."

Not all consumer advocates are so nervous and skeptical about the deal.

The Competitive Enterprise Institute, a nonprofit group that studies the intersection of regulation, risk and markets, said that federal regulators can best serve consumer interests by letting the deal happen.

Ryan Young, a fellow in regulatory studies for the CEI, said that if Microsoft and Yahoo are to compete successfully versus Google, they will need to put together the best search engine they can. Young said:

"They should be allowed to try—their own money is at stake if they fail. Either way, Internet users stand to benefit. Bing and Yahoo Search should improve from the proposed partnership, which will also force Google to make its own search engine better, lest it be left behind. This is how a competitive, contestable market works. The goal of antitrust policy is to benefit consumer welfare, but there is nothing regulators can do to make an already fiercely competitive market even more so."

Wayne Crews, vice president for policy and director of technology studies for CEI, added that antitrust investigations "steer the market in unnatural directions, creating instabilities in entire industry sectors."

While the world waits to see how regulators view the deal, many Yahoo shareholders will likely oppose the deal. Noting that search is the killer application on the Internet, eWEEK reader James Fox said shareholders may want Yahoo to keep its search assets intact to preserve the company's 20 percent market share. At the least, shareholders may prefer that Yahoo sell its search assets for loads of money up front.

If not, Fox said Microsoft will just gradually erode Yahoo's business once it takes over Yahoo's core search assets.

"Knowing Microsoft's tradition of benefiting its own apps and properties in detriment to third parties, they slowly will improve MSN to outperform Yahoo," Fox wrote.

Fox isn't the only one who feels this way. Mahalo CEO Jason Calcanis said Yahoo committed suicide with this deal. More on TechMeme here.