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California legislators back Google-Yahoo online ad deal

by Staff Writers
San Francisco (AFP) Sept 30, 2008
Eleven California state political leaders are urging US regulators not to interfere with a proposed online advertising tie-up between Google and Yahoo.

The legislators, from the state where both the Internet titans are based, signed a letter warning US Attorney Michael Mukasey that Internet market growth and innovation "could be stifled" by blocking the Google-Yahoo alliance.

"We are deeply concerned that the Department of Justice may be considering a preemptive lawsuit to block Yahoo's non-exclusive online advertising agreement with Google," they said in the letter.

"If such action were taken, we believe such an unprecedented suit could detrimentally affect the online advertising market and e-commerce."

The deal lets Google use its online advertising expertise alongside the Yahoo search engine. Because it is not a merger, the alliance does not combine the companies' shares of the online ad market, the politicians argue.

Microsoft senior vice president and general counsel Brad Smith stands behind a scathing assessment of the tie-up, saying it would crimp competition and give Google "unprecedented" control of the gateway to the Internet.

Google and Yahoo defend the alliance as positive for consumers and businesses, but Smith maintains the tie-up would give Google "an unprecedented level of control over advertising for search on the Internet -- up to 90 percent potentially of all search ads."

"That's just plain wrong," Yahoo president Sue Decker wrote Friday in an online posting titled `Myth busting and the Yahoo-Google agreement.'

"It's simply a contract that gives Yahoo the right, but no obligation, to show Google AdSense ads on Yahoo's own network."

The campaigning legislators agree with Decker, saying in their letter that such non-exclusive agreements are "standard" among Internet companies.

The World Association of Newspapers (WAN) came out two weeks ago against the Yahoo-Google ad alliance, saying it "strenuously opposes" a deal it thinks will harm competition in the online ad market.

Along with US anti-trust watchdogs, the European Union's top competition regulator has opened an investigation into the proposed online advertising tie-up.

"This is an agreement between two of the major players on the Internet; clearly we are being prudent" in opening the probe, said Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes.

"We don't know whether there is a problem; we are looking at it in case there is," he said of the preliminary investigation that was launched in July.

Google and Yahoo say the deal is limited to Web properties in the United States and Canada, but Google has said there is potential to extend it to other parts of the world.

Paris-based WAN is asking competition authorities in both North America and Europe to block the advertising deal on anti-competitive grounds.

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