Microsoft cites Yang comments on Google-Yahoo deal

By Diane Bartz

WASHINGTON (Reuters) - A top Microsoft Corp executive said Yahoo Inc's advertising search partnership with Google Inc would leave only one major player in the Internet search business, and said he had been told as much by Yahoo's own chief executive last month.

Testifying at a congressional hearing, Microsoft General Counsel Brad Smith said that in a June 8 meeting in San Jose Yahoo chief Jerry Yang described Internet search as a "bipolar" market, with Google on one side and Yahoo and Microsoft on the other.

"(Yang) said 'If we do this deal with Google, Yahoo will become part of Google's pole and Microsoft,' he said, 'would not be strong enough in this market to remain a pole of its own,'" Smith told the Senate Judiciary Committee's antitrust subcommittee on Tuesday.

He said Microsoft executives met later in a separate conference room. "We sat down and we said, 'We can't believe that Jerry just said those things.'"

Smith used the anecdote to bolster Microsoft's contention that the Google-Yahoo deal would violate antitrust law.

"That's pretty explosive stuff and we'll have to consider that," agreed the antitrust subcommittee's chairman, Democratic Sen. Herb Kohl of Wisconsin.

Yahoo General Counsel Michael Callahan, also testifying at Tuesday's hearing, said he had been at the June 8 meeting but he disputed Smith's description of what Yang had said.

"I disagree with how Mr. Smith characterized what Mr. Yang thinks about the market," said Callahan. "Our board of directors made a conscious decision to stay in search."