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7/14/2008
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Google And Microsoft Spar Over Yahoo Ad Deal

The two tech giants trade statements ahead of today's Congressional hearing on the Google's advertising pact with Yahoo.

The U.S. House of Representatives Judiciary Committee on Tuesday plans to review Google's advertising pact with Yahoo. Google remains bullish on the deal but plenty of people would like to see it derailed.

In June, Google and Yahoo announced a non-exclusive advertising arrangement to allow Google to run ads alongside Yahoo's search results.

Omid Kordestani, Google SVP of global sales and business development, said in blog post at the time that the partnership promoted completion. "The truth is, this kind of arrangement is commonplace in many industries, and it doesn't foreclose robust competition," he said. "Toyota sells its hybrid technology to General Motors, even though they are the number one and number two car manufacturers globally."

The Department of Justice is also reviewing the agreement between the Google and Yahoo, an investigation that Google has characterized as a routine.

Antitrust officials at the U.S. Department of Justice and in several states have begun issuing subpoenas for information as part of a review of the proposed search-advertising partnership between Yahoo Inc. and Google Inc., according to a person familiar with the investigations.

The MarketWatch Web site reported this morning that antitrust officials at the U.S. Department of Justice and in several states "have begun issuing subpoenas" for information as part of a review of the proposed deal between Yahoo and Google.

Google's position hasn't changed since the deal was announced. What has changed is the company's willingness to question Microsoft's motives and role in the controversy surrounding the deal.

In prepared remarks to be presented on Tuesday, David Drummond, Google's chief legal officer and SVP of corporate development, insists that the deal is good for everyone. "My message to you today is simple: While there are other threats to the continued competitiveness of the Internet, the online advertising marketplace is competitive, robust and dynamic," his statement says.

Among those other threats is Microsoft.

"Microsoft continues to maintain dominant positions in desktop computing that could be leveraged to harm competition online," Drummond's statement says. "For example, Microsoft maintains more than 90% share in operating systems, more than 95% share in productivity applications through Windows Office, and approximately 80% share of the browser market through its Internet Explorer browser that comes bundled with its other software."

Drummond's remarks point to Microsoft's long history of abusing and extending its market position through anti-competitive tactics, its desire to control technical standards or to deny interoperability, its licensing abuses, and resistance to data portability.

"While it's easy to imagine using a different search engine -- others are just one click away, and millions of people use different search engines every day -- Microsoft has locked consumers into its PC-based software monopolies," Drummond's statement says. "For years, Microsoft has been working to leverage that lock-in onto the freer and more open world of the Internet."

Microsoft, meanwhile, has much the same to say about Google.

In prepared remarks to be presented on Tuesday, Brad Smith, SVP and general counsel at Microsoft, warns that Google has become the dominant gateway to the Internet.

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