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Microsoft-Yahoo Deal Draws Antitrust Scrutiny

By Information Week

Antitrust bodies in the U.S. and Europe are eyeing Microsoft (NSDQ: MSFT)'s search partnership with Internet portal Yahoo (NSDQ: YHOO) to ensure the deal doesn't run afoul of competition rules.

"As we said when the agreement was announced, we anticipated that this deal will be closely reviewed in the United States and EU, and discussions in both geographies continue," a Microsoft spokesman told the Reuters news agency Wednesday.

The spokesman said Microsoft remains confident that the deal will close sometime in 2010.

Microsoft and Yahoo struck a wide-ranging search partnership on July 29. Under the ten-year pact, Microsoft will place its Bing search engine on all Yahoo sites and, initially, keep 12% of the revenue from Yahoo-driven searches. Yahoo will handle sales and marketing for premium search ads for both its own properties and Microsoft's.

Microsoft is also committed to hire a minimum of 400 Yahoo employees on a full-time basis as it extends Bing to Yahoo's Web sites. It will also hire an additional 150 Yahoo workers to help with the transition.

Yahoo can terminate the arrangement if organic seo search traffic generated by the alliance falls below a specified percentage of Google's traffic. Yahoo also retains the right to expand the partnership by adding Microsoft's mapping and mobile search services to its Web properties.

Microsoft must submit to Yahoo copies of all data it collects from its sites while providing search services, according to an SEC filing.

Yahoo CEO Carol Bartz has said that, by in effect outsourcing search to Microsoft, her company can save $200 million in annual capital expenditures through reduced spending on search-related operations. The companies said it could take up to two years for them to fully implement their agreement.