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Yahoo says DOJ threat scuttled Google deal

Contends that the Internet firms could have defended the proposal in the courts

By Grant Gross
November 5, 2008 12:00 PM ET

IDG News Service - A U.S. Department of Justice plan to block Google Inc.'s proposed advertising deal with Yahoo Inc. led to the dissolving of the plan today, according to Yahoo.

Google had pointed to continued concerns among U.S. regulators and Internet advertisers in its announcement earlier today, but it did not say that the DOJ was planning to block the deal. The deal would have lead to a "lengthy legal battle," Google said.

The deal, first announced in June, would have allowed Yahoo to run Google advertising on its search pages, and Yahoo had said projected that it would add $800 million to its annual revenue.

Yahoo, in a statement, expressed disappointment that Google backed out of the deal. "Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court," the company said. "Google notified Yahoo of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the DOJ's concerns."

In a post on Google's public-policy blog earlier today, David Drummond, the company's senior vice president and chief legal officer, said that the controversy over the proposed deal had become a distraction top the firm.

"After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," Drummond said. "Pressing ahead risked not only a protracted legal battle, but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement."

Drummond said that Google is also disappointed that it had to kill the proposal, but added that "we're not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on."

Google and Yahoo had voluntarily disclosed the deal's details to the DOJ, but the agency had yet to approve the proposal. Groups of Web advertisers had expressed concerns that the deal would lead to fewer options for Internet advertising and higher advertising rates. Google rival Microsoft Corp. also lobbied hard against the deal.

The DOJ said the decision to call off the deal preserves competition in search advertising. "The companies' decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action," said Thomas Barnett, assistant attorney general in charge of the Justice Department's antitrust division, in a statement. "The arrangement likely would have denied consumers the benefits of competition -- lower prices, better service and greater innovation."

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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