Google, Yahoo Seek to Avoid Antitrust Suit
Google Inc. and Yahoo Inc. are in talks with the Justice Department in an effort to head off an antitrust challenge to their proposed advertising agreement.
The settlement negotiations are at an early stage and it isn't clear whether they will resolve U.S. objections or be acceptable to the two companies, lawyers close to the effort said.
At the same time, investigators are continuing to build a lawsuit to block the deal, worried it would give Google too much power in online advertising.
Major advertisers have raised objections to the Google-Yahoo deal, which would align the two largest players in Internet ads. Advertisers have told Justice Department officials that the partnership will limit competition, raise prices and reduce choices.
Under their proposed partnership, Yahoo will start displaying search ads sold by its rival. The companies say the arrangement would serve advertisers and users more efficiently. For Yahoo, it would mean hundreds of millions of dollars in much-needed new revenue in its first year.
The alliance would also create a strategic bulwark against software giant Microsoft Corp., which unsuccessfully bid $45 billion for Yahoo earlier this year in an effort to shore up it third-place position in online ads.
In the settlement talks with the government, both companies have discussed concessions. These include capping the volume of Google ads Yahoo would use, assurances that Yahoo would continue to compete in search ads, and a reporting mechanism to ensure compliance, people close to the talks said. U.S. officials hope to impose measures that will ensure that prices advertisers must pay don't rise significantly after the deal.
Google and Yahoo declined to comment on a possible settlement and have said they believe the deal as currently structured is good for competition and for consumers. A Justice Department spokeswoman declined comment, adding, "our investigation is ongoing."
Reworking the deal to include a reporting mechanism, could require the companies to disclose more about the mechanics of their closely-guarded search-advertising technology than they want to. And caps on how many Google-sold ads Yahoo can display could limit Yahoo's financial gains from the agreement.
Google's critics, including Microsoft, have forcefully argued that online search advertising is too dynamic and complex to allow a settlement that could work and be effectively policed.
If the companies reach a settlement with regulators, its principles would likely be laid out in a consent decree that would be filed in court.
While that would allow the deal to proceed, it would also be a formal recognition of Google's market power. That could constrain the Mountain View, Calif., company's conduct in the future and might draw private antitrust suits from competitors or advertisers.
Even as senior Justice Department officials weigh the companies' proposals to resolve antitrust issues, its trial staff continues to prepare a lawsuit to block the deal, according to lawyers and executives contacted by the government.
Justice Department officials already have deposed Google Chief Executive Eric Schmidt and other key figures in the case. Opponents, including Microsoft, have been provided documents and depositions for use in a possible lawsuit.
The companies have been cooperating with the Justice Department's investigation and recently agreed to delay implementing the deal until at least Oct. 22 to give federal and state antitrust officials time to complete their separate investigations.
