Washington — The US Department of Justice is looking into the advertising and search alliance between Microsoft and Yahoo, has asked for more documents about their proposed partnership in search results and related advertising, showing that antitrust officials are giving full scrutiny to the deal, the two companies revealed last week.
While the two companies, which trail a distant second and third respectively to Google in the internet search market, have announced an arrangement in late July in a bid to combine forces and challenge the web giant as a way to create a more solid competitor to Google, they had anticipated a deep antitrust inquiry and had not predicted that the deal would close before next year.
Both Microsoft and Yahoo confirmed that the Justice Department’s antitrust division had made a second request for documents, which indicates a decision to conduct a deeper review that could take months.
The DOJ has asked for additional details about the deal earlier this week, Microsoft spokesman Jack Evans said. Microsoft expected the DOJ to look into the agreement and conduct a “thorough review,” he added.
“When we announced the agreement, we said we were hopeful it would close by early next year,” Evans said.
A DOJ spokeswoman said she could not comment on the Microsoft/Yahoo deal.
“We are positively cooperating fully,” said Yahoo spokesman Adam Grossberg.
Yahoo said nothing in the new request had altered their closing date out past “early next year”, the time-frame it gave when the tie-up was announced in late July. Yahoo and Microsoft would not divulge the Justice Department’s chief areas of concern, but officials had been seeking more information on the expected impact on ad pricing. The Justice Department declined to comment.
“This is something that our executives had said all along, they expressed the view that we would receive an extended review of this deal,” said Yahoo spokesman Nina Blackwell.
As per the announced deal, Microsoft’s Bing will provide search and related advertising tools on Yahoo’s pages, in return for a 12-per cent revenue cut during the first five years of the deal. Yahoo estimates the pact will add $500 million to annual operating income while cutting capital expenses by $200 million.
Under the 10-year agreement that took nearly a year and a half to formulate and started with an unsolicited failed bid by Microsoft to buy Yahoo in February 2008. The aim of the pace is to enable Microsoft and Yahoo to provide more search competition to market-leader Google. As of June, Google had a search market share of over 70 percent in the U.S.
While the antitrust review has been anticipated, analysts say that the Department of Justice is unlikely to block the deal since the two companies’ combined share of the market would still be less than half held by Google.
While Yahoo’s agreement with Google for a search-ad partnership was thwarted last year after vehement objections from advertisers and newspapers, the two industries were enthusiastic about the prospect of Microsoft and Yahoo teaming up to provide stronger competition to Google, said a source close to the deal who asked not to be named because of its sensitivity.
Both companies expressed confidence saying they did not expect the deal to face antitrust obstacles. “As we said when the agreement was announced, we anticipated that this deal will be closely reviewed and we are hopeful it will be approved by early 2010,” Microsoft spokesman Jack Ward said.
Another source close to the deal declined to describe what information had been requested. “It is fairly detailed in that we have to provide data on our search engine deal,” said the source, who also declined to be named because of the sensitivity of the matter. “It is just more encompassing.”
The Microsoft and Yahoo deal must clear regulatory approval in both the U.S. and Europe. It is still unclear whether the European Union will undertake a formal review, Evans said.