UPDATE 3-EU competition officials probing Google-Yahoo deal

Mon Sep 15, 2008 10:24pm BST

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(Adds comments from U.S. newspaper group, paragraphs 5-6)

BRUSSELS, Sept 15 (Reuters) - European Union antitrust watchdogs are looking into a planned deal between Internet giants Google Inc (GOOG.O) and Yahoo Inc (YHOO.O) to share some advertising revenue.

"In mid-July, we decided to open a preliminary investigation on our own initiative into potential effects of the Google-Yahoo agreement on competition in the European Economic Area (EEA) market," said Jonathan Todd, a spokesman for European Competition Commissioner Neelie Kroes.

Under terms of the deal, first announced in June, Google will supply Yahoo with advertising services to run alongside Yahoo's own Web search system.

Google and Yahoo said the deal would only be in effect in the United States and Canada, but the World Association of Newspapers said it would hurt Yahoo's ability to compete against Google in the future and called on EU antitrust authorities to scrutinize it.

The Newspaper Association of America, which is part of the World Association of Newspapers, distanced itself from the call for EU scrutiny.

"I would like to clarify that the NAA Board of Directors has taken no position on the proposed advertising partnership between Google and Yahoo," Chief Executive John Sturm said in a statement.

Commission spokesman Todd said there was no deadline for the investigation in Brussels.

The probe is similar to one in Washington, where the U.S. Justice Department is also looking into whether a commercial tie-up between the two companies, which together have 80 percent of the market, would violate antitrust law.

Google and Yahoo said that they would cooperate with the Brussels probe.

"Yahoo has been and will continue to work with the relevant regulatory agencies to provide officials with the necessary information about this business agreement, which we believe will strengthen competition in search and make advertisements more relevant for our users," the company said in a statement.

Google agreed.

"The agreement is limited in scope to Yahoo's U.S. and Canadian websites, and it will not have any significant effect on Europe. We are, of course, cooperating with the commission and are confident that they will reach the same conclusion," said Google spokesman Adam Kovacevich.

The EEA comprises the EU and some neighboring countries.

Companies ruled to be in breach of the EU's competition rules can face fines of up to 10 percent of their global revenues. (Reporting by William Schomberg and Diane Bartz in Washington; Editing by Bernard Orr, Leslie Gevirtz)

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