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10/3/2008
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Google-Yahoo Deal Needs Oversight, Senator Says

The companies announced in June their nonexclusive advertising deal, which would allow Google to run ads alongside Yahoo search results.

U.S. Sen. Herb Kohl, D-Wis., on Thursday asked the U.S. Department of Justice to keep a close eye on the Google-Yahoo advertising partnership that's scheduled to begin later this month.

In a letter to Assistant Attorney General Thomas Barnett, Kohl, who oversees the Senate Antitrust Subcommittee, reiterated concerns raised by those critical of the deal and urged the Department of Justice to keep Google and Yahoo on a short leash.

"Recognizing the nascent and fast-changing nature of this marketplace, we encourage the department to continue to monitor the state of competition in this industry, whatever the outcome of its current investigation," Kohl wrote in his letter. "If, over time, you determine that Google is gaining a dominant market position as a result of the Google-Yahoo agreement, then we would encourage the Justice Department to intervene to protect competition. Even should you conclude at present that this deal is not contrary to antitrust law, the department must be sure that this deal never in the future crosses the line into an unacceptable, anti-competitive collaboration among competitors which will harm consumers and advertisers."

Kohl's letter comes just as the Justice Department is expected to announce whether it will allow the deal and whether it will require the two companies to abide by any restrictions. The Justice Department's decision to hire noted antitrust litigator Sandy Litvack last month was widely seen as a sign that the government plans to intervene in some way.

Google and Yahoo announced their nonexclusive advertising deal in June. It allows Google to run ads alongside Yahoo search results. Both companies have defended the arrangement as beneficial to advertisers.

Last week, Yahoo president Sue Decker published a blog post that attempted to address critics' objections to the deal.

"Yahoo will use this agreement to help us become a stronger competitor in all aspects of online advertising," she said. "And Yahoo is not exiting the sponsored search business. We plan to remain a strong player in sponsored search."

Decker denied that the agreement gives Google control over 90% of the search advertising business. "That's just plain wrong," she said, noting that the deal gives Yahoo the right to show Google ads on its network but does not impose any obligation to do so. She said that the deal was designed to be nonexclusive precisely to avoid antitrust concerns.

Yahoo expects the deal will generate somewhere between $250 million and $800 million in annual revenue.

A Google spokesman in a statement last month said, "Numerous advertisers have recognized that this agreement will help them better match their ads to users' interests, and that ad prices will continue to be set by competitive auction."

Microsoft, which failed in an attempt earlier this year to purchase Yahoo and hasn't seen much success with its search advertising efforts, has objected to the deal since it was announced. In July, Brad Smith, senior VP and general counsel at Microsoft, warned that the deal will give Google a monopoly on search advertising. The Association of National Advertisers, an ad industry trade group, last month voiced similar concerns.

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