Microsoft, Yahoo Search Deal Under Justice Department Scrutiny

Microsoft and Yahoo's partnership over Internet search and ad sales is currently being examined by the U.S. Department of Justice, which is likely seeking information on deal aspects such as advertising pricing. Originally announced in July, the agreement has Bing powering Yahoo search, bringing Microsoft's share of the search-engine market to nearly 30 percent, versus arch-rival Google's 65 percent.

Microsoft and Yahoo's partnership deal over Internet search will be examined more deeply by the U.S. Department of Justice to ensure that the agreement falls within the boundaries of antitrust laws.

Microsoft confirmed that the Justice Department was indeed seeking more information, but was expectedly tight-lipped about details.

"As expected, Microsoft and Yahoo have received requests for additional information about the agreement," Jack Evans, a spokesperson with Microsoft, said in a Sept. 11 statement e-mailed to eWEEK. "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."

The Justice Department will likely examine aspects of the agreement such as Microsoft's investment in Bing, its new search engine, and details such as advertisement pricing. The original search ad deal, inked between the two companies on July 29, will have Bing powering Yahoo's search engine, while Yahoo becomes the exclusive worldwide relationship sales force for both companies' search advertisers.

Microsoft and Yahoo hold a respective 8.4 percent and 19.6 percent of the U.S. search-engine market, compared to Google's 65 percent market share, and executives of the combined Microhoo hope that the deal will give them the scale needed to effectively combat their mutual search-engine rival. Under the terms of the agreement, the partnership will last for 10 years.

Soon after the deal, Microsoft CEO Steve Ballmer suggested that the new influx of users and advertisers using Bing through Yahoo would "lead to more relevant ads and search results," thanks to a flood of new actionable behavioral data. In 2008, Ballmer led Microsoft's failed attempt to buy Yahoo for $44.6 billion.

In a move that may, in retrospect, help assure the partnership agreement's passage through a government review without a hitch, Yahoo executives insisted in a press conference on Aug. 24 that, despite Bing powering the company's Webpages, it still remained committed to competing in the online space.

"The agreement calls for Microsoft to supply us with algorithmic search results, images and video," Prabhakar Raghavan, senior vice president of Yahoo's Labs and Search Strategy, said at the time. "We will be free to innovate on top of that layer."

While Bing will continue to fight what Raghavan termed the "megawatt war" against Google over indexing and producing results from billions of Web pages, Yahoo will upgrade its user-end features including Yahoo Search, Yahoo Messenger and Yahoo Mail. The hope, evidently, is that these applications will give Yahoo an advantage over similar offerings from Microsoft and Google, whose respective search-engine pages emphasize search over added features.

Despite Bing's gains in search-engine market-share as a result of the deal, analysts have publicly doubted whether Google can be threatened in the short term. Yahoo has a potential backdoor escape from the deal in the form of a contract provision that allows the agreement to be terminated if Google's RPS (revenue-per-search) query rate is higher than Microsoft's and Yahoo's combined RPS rates.