Google-Yahoo Deal Grabs Washington's Attention

An otherwise routine June 18 hearing of the Senate Commerce Committee is taking on a new meaning with the June 12 advertising agreement between Google and Yahoo. The panel's topic is "Privacy Implications of Online Advertising," but lawmakers are sure to plunge into the details of the proposed deal.

With that hearing already set, U.S. Sen. Herb Kohl, D-Wisc., chairman of the Senate Antitrust Subcommittee, rushed to assure voters his own panel would be scrutinizing the deal.

"We will closely examine the joint venture between Google and Yahoo," Kohl said in a June 12 statement. "This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns."

If ultimately approved by federal regulators, the deal would combine the world's two most popular search engines.

"The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further in the Antitrust Subcommittee," Kohl said.

With the deal announcement, both Google and Yahoo went to great lengths to address the antitrust concerns of Washington. The companies stressed the deal is not a merger and is non-exclusive. Both companies pointed to similar deals that passed scrutiny between Google and AOL and Ask.com.

Google and Yahoo also agreed to delay submitting the deal to regulators for more than three months in order to buy time for the companies to negotiate with the government.

"The truth is, this kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition," Omid Kordestani, Goolgle's senior vice president of Global Sales and Business Development, wrote on the Google Public Policy blog.

Kordestani noted that Toyota sells its hybrid technology to General Motors, even though they are the No. 1 and No. 2 car manufacturers globally. In addition, Canon provides laser printer engines for HP although the two companies are direct competitors.

"Google and Yahoo will continue to be vigorous competitors, and that competition will help fuel innovation that is good for users," Kordestani wrote.

Tougher than usual scrutiny, though, is likely to dog the deal.

"A move this aggressive will undoubtedly set off bells, whistles and sirens in Washington and Brussels," the Association for Competitive Technology's Mark Blafkin wrote on the ACT's blog. "Deals like this between No. 1 and No. 2 players in a market are usually frowned upon. Google and Yahoo obviously knew this going in and have gone to a lot of trouble to structure this deal in a way to avoid regulatory scrutiny. I'm just not sure it's enough."