(Adds statement from Microsoft, paragraph 8)
By Peter Kaplan
WASHINGTON, June 13 Microsoft Corp (MSFT.O)
sought on Friday to enlist support for its opposition to a new
advertising collaboration deal between Google Inc (GOOG.O) and
Yahoo Inc YHOO.O, two sources familiar with the matter told
One day after the companies announced an agreement allowing
Google to sell search ads on Yahoo's Web site, Microsoft
contacted advocacy groups that work to influence policy in
According to one source who was contacted by Microsoft, the
software company said in an e-mail that the Google-Yahoo
agreement would "limit choices for advertisers and publishers"
and "destroy a competitive alternative."
Specifically, Microsoft takes the view that the deal is
akin to a price-fixing agreement, with Google and Yahoo
effectively setting a minimum price for advertisements on some
key word searches, according to another source familiar with
"The effect of that is sitting down and agreeing, 'We won't
go below (the minimum price)'," this source said. Microsoft
also believes the arrangement will lead to the demise of
Yahoo's own search advertising business, eliminating a
competitor, he said.
Microsoft spokesman Jack Evans on Friday reiterated
Microsoft's overall objections to any Google-Yahoo deal, saying
it would make the Internet advertising market less
"Our position has been clear since April that any deal
between these two companies will increase prices for
advertisers and start to consolidate more than 90 percent of
the search advertising market in Google's hands," Evans said.
Microsoft later said in statement its lobbying approach
"reflects our belief that we have a responsibility to engage
with policymakers on issues that impact our products,
customers, shareholders and the industry overall ..."
It would be something of a role reversal for Microsoft if
the company also decides to press the U.S. Justice Department
to file an antitrust lawsuit. Microsoft spent years fighting an
antitrust lawsuit by the department alleging that it abused its
Windows monopoly. It settled the case in 2002 and agreed to
restrictions on its business practices.
The Google-Yahoo collaboration does not need up-front
approval from U.S. antitrust authorities since the two
companies are not merging. However, the Justice Department
could challenge the arrangement in court if it concluded that
it would restrain competition between them.
The companies agreed to wait 3-1/2 months for regulatory
approval and to offer a way to end it if Yahoo is taken over.
Several antitrust experts said the deal would probably not
be opposed by U.S. antitrust authorities. But others disagreed,
saying the Justice Department could be swayed by Microsoft's
arguments, particularly if the deal generates concern among
advertisers and publishers.
Google and Microsoft are bitter rivals. Microsoft staunchly
opposed Google's offer to buy advertising company DoubleClick
for $3.1 billion last year. U.S. antitrust regulators approved
the deal in December.
Google has likened its new deal with Yahoo to outsourcing
agreements that are not uncommon among competitors in other
industries. The company stressed that the deal is not exclusive
and leaves Yahoo free to pursue its own advertising business
and to partner with other companies in the business.
Google General Counsel Kent Walker on Friday disputed the
idea that the companies would be setting prices in any way.
Prices for the Internet search ads, he said, are determined
through an ongoing competitive auction.
"No one's coming in and saying, 'By the way, we're going to
set the prices for those ads,'" Walker said.
Walker said Yahoo would remain a "robust" company and
would have ample incentive to invest in its own search
"It's not committing to putting all its traffic though our
platforms -- far from it," Walker said.
(Editing by Toni Reinhold)