Microsoft, Yahoo Deal May Be Examined by EU, Says Report
Microsoft may be finding its partnership agreement with Yahoo under antitrust
scrutiny on both sides of the Atlantic.
"There are ongoing informal discussions between the European Commission
and Microsoft and Yahoo on their search engine partnership," an unnamed source
told Reuters on Sept. 15, but declined to elaborate further.
Under the original terms of the 10-year agreement between the two
companies, inked on July 29, Bing will power search on Yahoo's sites, while
Yahoo will become the exclusive worldwide relationship sales force for both
companies' search advertisers. Before the deal was announced, Microsoft and
Yahoo held a respective 8.4 percent and 19.6 percent of the
search-engine market; with the agreement in place, Bing's roughly 30 percent
market-share would theoretically present a stronger challenge to Google's 65
Microsoft hopes that the extra data flowing to Bing from Yahoo's sites
will initiate something of a virtuous cycle, with the added information leading
to more relevant ads and search results.
In addition to possible EU examination, the Microsoft and Yahoo
partnership is in the midst of a deeper probe by the U.S. Department of Justice,
which is examining the deal to ensure it meets antitrust regulations.
Microsoft confirmed in an e-mailed statement to eWEEK on Sept. 11 that
the Justice Department had indeed been asking questions about certain aspects of
the partnership, but was predictably reluctant to share further
"As expected, Microsoft and Yahoo have received requests for additional
information about the agreement," Jack Evans, a spokesperson with Microsoft,
said in the statement. "As we said when the agreement was announced, we
anticipated that this deal will be closely reviewed and we are hopeful it will
be approved by early 2010."
Yahoo has an escape clause in the deal, allowing it to break the
partnership if Google's RPS (revenue-per-search) query rate is
higher than Microsoft's and Yahoo's combined RPS rates. Yahoo has also indicated that it will continue to compete with Microsoft in application arenas such
Microsoft spent the summer already wrestling with
European antitrust regulators over its upcoming Windows 7 operating
system. Originally, Microsoft
planned on shipping a separate European Union version, Windows 7 E, that lacked
Internet Explorer 8, in order to counter regulator complaints that bundling the
browser with the operating system would violate antitrust laws.
Then Microsoft decided in August to release the same version of Windows 7
in the EU as in the rest of the world. However, the strategy carries some
"We recognize that there are still several steps ahead in the [EU]
commission's review of our proposal and that we are not done," Dave Heiner, vice
president and deputy general counsel for Microsoft, wrote in a statement at the
time. "We've been open both with the commission and with our customers and
partners that if the ballot-screen proposal is not accepted for some reason,
then we will have to consider alternative paths, including the reintroduction of
a Windows 7 EW version in Europe."
In July, a Bloomberg report suggested that Microsoft was pushing the EU to wrap up its long-running antitrust investigations before EU Competition Commissioner Neelie Kroes steps down from office at the end of 2009. Microsoft CEO Steve Ballmer has met with Kroes on previous occasions in attempts to settle issues between his company and the EU.