October 2, 2008 / 7:49 PM / 11 years ago

UPDATE 1-Sen. Kohl asks for continued Google, Yahoo monitoring

(Adds dateline, background, additional quotes from letter)

WASHINGTON, Oct 2 (Reuters) - Yahoo Inc’s YHOO.O deal to put some Google Inc (GOOG.O) ads on its searches may hurt the industry, and warrants monitoring by the U.S. Justice Department even if the agency eventually approves the deal, according to the top lawmaker on the Senate’s antitrust panel.

Sen. Herb Kohl, a Wisconsin Democrat and chair of the antitrust subcommittee, did not urge that the deal be blocked, saying on Thursday his panel was not privy to “confidential business information supplied by the companies to the department.”

But he added that “should the amount of advertising outsourced by Yahoo to Google grow significantly, we believe the threat to competition will also increase.”

He urged the department to step in “if, over time, you determine that Google is gaining a dominant market position as a result of the Google-Yahoo agreement.”

Advertisers in particular have worried aloud that Yahoo’s deal to put Google’s more numerous and more lucrative advertisements on its website would end up costing them money.

Under an arrangement struck in June, Google will supply Yahoo with advertising services to run alongside Yahoo’s own Web search system. Together the two companies have more than 80 percent of the search market.

The arrangement has not been implemented while the Justice Department assesses it.

The arrangement has been widely seen as an attempt by Yahoo to expand its revenue by between $250 million and $800 million annually and stave off being absorbed by Microsoft.

Kohl warned that the deal between Google and Yahoo, the No. 1 and No. 2 in search advertising, raised questions about whether it would raise prices for advertising and whether it would strengthen Yahoo or weaken it.

“Should the amount of advertising outsourced by Yahoo to Google grow significantly, we believe the threat to competition will also increase,” Kohl wrote in the letter dated Oct 2. (Reporting by Diane Bartz, editing by Richard Chang)

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