Oct 5, 2008 2:46 pm US/Pacific
Google And Yahoo Ad Deal Delayed
MOUNTAIN VIEW (CBS 5 / AP) ―
Google Inc. agreed to delay the start of a Web advertising partnership with rival Yahoo Inc., giving U.S. antitrust regulators more time to review the deal.
Under a plan announced in June, Google would provide advertising next to some of Yahoo's search results. The companies voluntarily held off for three months to give regulators time to assess whether the alliance will hurt competition.
Microsoft Corp., the No. 3 player in Web search, and a large group of advertisers, have protested the deal because together, Google and Yahoo control more than 80 percent of the rapidly growing U.S. market for search advertising.
Two weeks ago, Google CEO Eric Schmidt told The Associated Press he would not wait much beyond the intended Oct. 11 start date.
But in a statement Saturday, the Mountain View-based company said that since it was still in talks with the U.S. Department of Justice, it has agreed to "a brief delay" in implementing the agreement while the discussions continue.
The deal with Google represented a much-needed escape hatch for Yahoo, under pressure from shareholders to prove it could recover from lackluster financial performances after spurning a rich takeover offer from Microsoft.
Last week, a key senator had urged the Justice Department to keep up its investigation into the antitrust implications of the Internet advertising partnership.
In a letter Thursday, Wisconsin Democrat Herb Kohl, chairman of the Senate Judiciary antitrust subcommittee, said his panel concluded that "important competition issues are raised by this transaction." He urged the Justice Department to "continue to monitor the state of competition in this industry."
Kohl, who expressed concerns about the partnership when it was first disclosed and held a hearing in July, did not take a formal position on whether the deal should be blocked. But his letter urged the Justice Department to step in to protect competition if it determines that Google is "gaining a dominant market position" because of the agreement.
He added that even if the department concludes that the partnership does not violate antitrust law, it "must be sure that this deal never in the future crosses the line into an unacceptable, anticompetitive collaboration among competitors which will harm consumers and advertisers."
Google and Yahoo have ramped their own campaign to defend the partnership. They insist the deal will benefit consumers and advertisers by enabling both companies to deliver targeted ads that are more relevant to viewers.
"We believe that this arrangement is good for competition and will benefit advertisers, Web site publishers and consumers," Google said in a statement.
Responding to predictions that the deal will further cement Google's grip on the online advertising marketplace, the two companies have also stressed that it will be up to Yahoo to decide when and whether to show an ad from Google's inventory. And they maintain that by driving additional revenue for Yahoo, the partnership will make it a stronger competitor to both Microsoft and Google.
Kohl is not the first member of Congress to weigh in. Last month, a handful of lawmakers from the Bay Area, where both Google and Yahoo are based, sent a letter to the Justice Department arguing that its intervention "could detrimentally affect the online advertising market and electronic commerce."
And 10 members of the House Judiciary Committee have also urged the department to examine the deal closely "to ensure that it promotes, and does not hinder competition."
(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
