Groups pressure DOJ on Google-Yahoo ad deal

Competition, privacy issues cited

Critics of Google Inc.'s proposed advertising deal with Yahoo Inc. stepped up the pressure on the U.S. Department of Justice (DOJ) this week, as the agency decides if it will oppose the deal.

The Center for Digital Democracy (CDD), a privacy and consumer advocacy group, on Thursday sent a letter to Sen. Herb Kohl (D-Wis.), chairman of the Senate Antitrust Subcommittee, asking the lawmaker to call on the DOJ to either oppose the deal or put significant conditions on the partnership between Google and Yahoo.

In June, Kohl said the proposed deal "raises important competition concerns."

The letter came a day after 10 members of the House of Representatives Judiciary Antitrust Task Force wrote their own letter to the DOJ, urging it to "closely review" the ad deal. The letter, signed by five Democrats and five Republicans, didn't specifically call for the DOJ to reject the deal, but it repeated many concerns about it.

The letters to the Justice Department come some observers speculate that the agency will complete its review of the deal soon. The DOJ has no deadline to complete a review and support or oppose the deal, but The Wall Street Journal reported on Friday that the DOJ is meeting with opponents and the companies this week and next, and Google and Yahoo expect the DOJ to complete its review by early October.

Google and Yahoo plan to move forward with the agreement in October. They voluntarily submitted the deal to the DOJ after they announced it in June, and the two companies do not need Justice Department approval before implementing the conditions of the deal. The DOJ could file a lawsuit to block the deal after it goes live, however.

The agreement would allow Yahoo to display Google search ads, but Yahoo says it plans to continue to offer its own search advertising system and compete with Google in basic search functionality and other areas.

A Google spokesman declined to describe the progress of the DOJ review. A DOJ spokeswoman wasn't immediately available for comment.

Even as critics raised new concerns about the agreement, Google launched the YahooGoogleFacts Web site to counter the criticism. The agreement is a nonexclusive deal, meaning Yahoo can also run ads from other companies, and the prices for both Yahoo-generated ads and Google ads on Yahoo pages will continue to be set by a competitive auction process, according to the Web site.

"This deal will preserve competition in the online marketplace," reads the Web site, which was launched Thursday. "This agreement -- unlike Microsoft's proposed acquisition of Yahoo -- means that Yahoo will remain an independent company in the business of search and advertising. Yahoo has stated that it will reinvest the additional revenue from this agreement into improving its user services and competing vigorously against Google, Microsoft and other companies."

But critics of the deal continue to raise their concerns. The deal would allow Google to control up to 90% of the online search advertising market, said the House letter, signed by Rep. Steve Chabot (R-Ohio), Rep. Linda Sanchez (D-Calif.) and eight other lawmakers.

"New entrants would have significant financial hurdles to cross in order to be competitive," the letter said. "Bluntly, competition in the online advertising market would be significantly constrained under a prospective Google-Yahoo agreement."

The CDD letter, signed by executive director Jeff Chester, said the deal would allow Google to expand its existing lead in search-advertising market share. "The formal joining together of the country's two leading competitors to deliver search advertising is a troubling development for advertisers, consumers and citizens," Chester wrote. "We hope you will urge the DOJ to not say 'We surrender' to the idea that competition is necessary for the online advertising market."

Chester also called on the government to examine the potential privacy issues posed by the deal. The Federal Trade Commission has decided not to look at the privacy implications, he noted. "U.S. consumers are not receiving the privacy safeguards necessary as major mergers or deals in this sector are being reviewed," Chester wrote.

Copyright © 2008 IDG Communications, Inc.

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