Microsoft-Yahoo Deal Draws Antitrust Look - InformationWeek
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9/11/2009
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Microsoft-Yahoo Deal Draws Antitrust Look

Department of Justice seeks additional documents relating to search agreement.

Trustbusters at the Department of Justice have asked Microsoft and Yahoo for more information about their Internet advertising and search alliance to ensure it doesn't run afoul of competition laws, the companies confirmed Friday.

Spokespersons for both Microsoft and Yahoo told Reuters that their companies were cooperating with the request for documents relating to the agreement, but didn't provided specific details.

The DOJ's move isn't the government's fist look at Microsoft's partnership with Yahoo. In July, the chairman of the Senate's subcommittee on antitrust issues said the body would scrutinize the arrangement for competitive issues.

After months of negotiations, Microsoft and Yahoo on July 29 unveiled a wide ranging search alliance under which Microsoft's Bing technology will power queries on all of Yahoo's Web properties while Yahoo assumes broad sales responsibilities for both companies' Internet platforms.

Microsoft's AdCenter platform will serve as a self-service search advertising tool for both companies. The deal does not extend to Internet display advertising. Yahoo, meanwhile, will continue to "own" the overall user experience on its search pages, though Bing will carry out the actual queries.

Microsoft will compensate Yahoo for traffic from Yahoo's sites under a revenue sharing formula under which Yahoo will retain 88% of the search revenue generated on its pages for the first five years of the deal. Yahoo said it expects the arrangement to add $500 million to annual operating income and $275 million to cash flow while cutting capital expenses by $200 million.

Tempering antitrust concerns is the fact that, combined, Microsoft and Yahoo's share of the search market would still be less than half of that held by Google.

Google presently controls about 65% of the U.S. search market, while Microsoft owns only about 8% of the market, according to the most recent numbers from ComScore. Yahoo, the number two player, holds 20% of the market.


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