California Democrats Oppose DOJ Suit to Halt Google-Yahoo Deal

By Clint Boulton  |  Posted 2008-09-29 Print this article Print

In what is clearly a case of politicians supporting its California crown jewel, members of U.S. Congress from California Monday implored the U.S. Department of Justice not to sue to block Google and Yahoo's search advertising agreement.

U.S. House Rep. Anna Eshoo, D-Calif., Rep. Zoe Lofgren, D-Calif., and other Democratic members of U.S. Congress are siding with Google and Yahoo in this letter to DOJ Attorney General Michael Mukasey:

"We are deeply concerned that the Department of Justice (DOJ) may be considering a preemptive lawsuit to block Yahoo's non-exclusive online advertising agreement with Yahoo. If such action were taken, we believe such an unprecedented suit could detrimentally affect the online advertising market and electronic commerce."
Microsoft and other companies, organizations and politicians oppose the deal, which would enable Yahoo to run Google keywords alongside its own search results where it deems fit.

Microsoft, et al., claim such an agreement would consolidate 90 percent of the search ad market in the hands of two vendors, with Google eventually eclipsing Yahoo in the deal and crushing its "frenemy."

So, what do I take from the letter? Well, the key nugget is that we now have an indication of which way the DOJ is leaning; if what Eshoo and others have heard is true, it looks as though Mukasey and Co. are going to try to quash the Googlehoo deal.

California Democrats Ellen Tauscher, Sam Farr, Mike Thompson, Mike Honda, Doris Matsui, Jackie Speier, George Miller, Lynn Woolsey and Barbara Lee joined Eshoo and Lofgren in signing the letter, so we know Google and Yahoo successfully lobbied their home state Democrats for support of the deal.

Google provides a lot of jobs for Californians and is a source of pride in the state, standing for all that is not evil about the high-tech sector.

Clearly eating up rhetoric on the Web site Google created regarding the deal, as well as Yahoo's site about the pact, Eshoo, et al., argue that the agreement is not a merger, so neither Google nor Yahoo have exclusive control of online advertising in the deal. OK, that's an obvious point. But they then add:

"We believe that robust competition serves the public interest, but if the DOJ blocks this agreement, we fear that the threat of additional scrutiny may chill future agreements."
The Democrats add that this deal is like any other ad deal. Presumably, Eshoo and others are referring to deals between Google and AOL, Google and MySpace, or Microsoft and Yahoo.

It's not accurate to compare those deals versus Googlehoo. The only reason the DOJ is remotely interested in Googlehoo (along with the fact that chief high-tech monopolist Microsoft hit the panic button on the deal) is because it could consolidate search ad market share into the hands of the two dominant search providers. 

Google commands 63 percent of search market share and 90 percent of search-driven advertising. Together, Google and Yahoo command more than 80 percent of the Web search market share.

So, when Eshoo and Co. say that the "competitive and disruptive nature of the Internet makes it extraordinarily difficult for any company to dominate," I respectfully disagree.

You can't say Google doesn't completely control search, which is the gateway to the Web, as well as the ads that are paired with it. Partnering with Yahoo could only lengthen its lead. Whether or not it will help Yahoo is another matter.
Eshoo and the others don't have a valid argument to convince the DOJ why blocking the deal is bad for business, but they get points for effort.

I maintain that I don't have a problem with the Googlehoo deal. Google has won the search engine war, so I don't think it matters that it pads its lead and protects Yahoo from Microsoft, which we shouldn't forget was the original reason for the deal, in the process.


Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel