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7/2/2008
05:16 PM
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Google-Yahoo Deal Faces Justice Department Review

When the deal was announced, Google and Yahoo said they had agreed to delay it for three months to allow the Department of Justice time to review the arrangement.

The U.S. Department of Justice has opened a formal investigation into the online advertising deal between Google and Yahoo, The Washington Post reported Wednesday.

The Department of Justice didn't immediately respond to a request for comment.

Citing information provided by anonymous sources, the Post said that Justice Department antitrust investigations plan to seek documents not only from Google and Yahoo, but other large Internet and media companies.

Presumably, one such company is Microsoft, which until recently had been trying to acquire Yahoo. According to a report in The Wall Street Journal on Wednesday, Microsoft is preparing to make a new offer for Yahoo, having withdrawn a previous offer in May. In the event such an offer is made and accepted, that deal would certainly face an antitrust review, too.

Under the deal announced by Google and Yahoo last month, Yahoo has the option to display Google ads adjacent on Yahoo Search results pages and on the pages of its publishing partners in the United States and Canada. The two companies also committed to make their instant messaging networks interoperable.

The Google-Yahoo deal is nonexclusive, meaning that Yahoo is free to enter into similar deals with Microsoft or other companies.

When the deal was announced, Google and Yahoo said they had agreed to delay it for three months to allow the Justice Department time to review the arrangement. It may be that the investigation is nothing more than the government's acceptance of that invitation. Indeed, that's how Google sees it.

In an e-mailed statement, Google said, "We are continuing to have cooperative discussions with the Department of Justice about this arrangement and voluntarily delayed implementation for three and a half months in order to give them time to understand the agreement. That process is continuing exactly as expected. We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the process."

But according to the Post, the formal investigation undertaken by the Justice Department represents more significant scrutiny than the sort of pro forma review that the two companies appear to have anticipated.

Whatever the case, Google has already weathered a similar antitrust review as a consequence of its decision to acquire DoubleClick.

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