Google, Yahoo said to be in DOJ settlement talks to avoid antitrust challenge

Computerworld - Google Inc. and Yahoo Inc. are in early settlement negotiations with the U.S. Department of Justice in an effort to avoid an antitrust challenge to a proposed search advertising deal between the two companies, the Wall Street Journal reported today.

The paper quoted lawyers close to the effort, noting that it is unclear whether the negotiation will resolve any potential government objections to the deal, which was delayed earlier this month after coming under fire from a variety of objectors.

Still, DOJ investigators are continuing to build a lawsuit to block the proposed deal that would have Yahoo running Google advertising alongside its own search results, the paper said.

As part of the settlement talks with the government, Google and Yahoo have discussed concessions, which include capping the volume of Google ads that Yahoo would use, providing assurances that Yahoo would continue to compete in the search advertising space and developing a reporting mechanism to ensure compliance, the WSJ said.

Since it was announced, the Google-Yahoo partnership has come under fire from major advertiser groups and prompted the DOJ to hire a high-profile litigator to look into a possible antitrust investigation.

An antitrust think tank said the partnership could end up as a "black hole that swallows up Yahoo," thus justifying an antitrust injunction.

Earlier this month, the chairman of the U.S. Senate's antitrust subcommittee urged the DOJ to closely examine the proposed partnership, noting that it could lead to higher advertising prices and create unfair market conditions.

Sen. Herb Kohl (D-Wis.) noted then that the subcommittee's investigation found that many advertisers and competitors are concerned about Google's potential to control a dominant share of the search advertising market. Under the deal, Yahoo would have less incentive to compete against Google and could opt to exit the market altogether, Kohl asserted.

Adam Kovacevich, Google's senior manager for global communications and public affairs, said today in an e-mailed statement that while Google is "confident that the arrangement is beneficial to competition," the company is not commenting on details of the process.

"We are continuing to have cooperative discussions with the Department of Justice about this arrangement and agreed to a brief delay in implementing the agreement while those discussions continue," he added in the statement.

Yahoo said in a statement that it has been working for months with the DOJ to "help them understand our commercial agreement with Google and the benefits it can provide our advertisers and users as well as Yahoo's overall competitive position" in online advertising.

"We believe strongly that this agreement will strengthen Yahoo's competitive position in online advertising and will help to drive a more robust, higher-quality Yahoo marketplace for our advertisers, publishers and users," according to the statement. "We look forward to bringing the benefits of this pro-competitive agreement to the marketplace as soon as possible."

Google has said that the deal would not result in huge advertising cost increases nor would it lead to a monopolistic hold on the online search advertising market.

For its part, Yahoo late last month launched a new digital advisory council to help it answer some of the questions that its advertisers have about the deal.

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