- The Washington Times - Wednesday, February 6, 2008

Closing a deal to combine their operations could be the easiest part for Microsoft and Yahoo. The software giant and the No. 2 search engine would then face regulatory approval.

Analysts expect authorities in the United States and Europe to approve of the marriage, but antitrust officials could attach conditions.

“In general, [antitrust officials are] going to look at whether, in the long run, they believe this creates more competition or less competition,” said Gary Miller of Eckert Seamans Cherin & Mellott in Pennsylvania. “And whether, even if it creates less competition, if there is still enough competition.”

In the United States, Google has 58.4 percent of the online search market, compared with 22.9 percent for Yahoo and 9.8 for Microsoft, according to Internet research firm ComScore. Globally, Google’s reach is even larger at 62.4 percent, while Yahoo and Microsoft shrink at 12.8 percent and 2.9 percent, respectively.

In December, the Federal Trade Commission signed off on Google’s $3.1 billion purchase of DoubleClick Inc., an ad-serving company, imposing no conditions on the combination of the top search engine with the top ad server. The transaction is still pending before the European Commission.

“I have to believe that they’re sitting at their desks, looking at those incredible market share numbers [of Google and DoubleClick],” Jonathan Zuck, president of the Association for Competitive Technology, said of European regulators. “I think they’ll have to look at this as a strong competitor to Google.”

Microsoft and the European Commission have not been the best of friends. The Redmond, Wash., software giant finally ended years of litigation last fall when it opted not to appeal a multimillion-dollar fine and requirements that it open up its Windows operating system to other companies.

The Yahoo deal involves search and advertising — not operating systems — said Mr. Zuck, whose group of 3,000 companies includes Microsoft.

“There’s history there, but fundamentally it’s different markets they’re talking about,” he said.

But regulators on both sides of the pond are likely to factor in Microsoft’s other products, Mr. Miller said.

“Microsoft’s trouble in the past has been because they’ve combined things,” he said. “So what they’re going to look at in addition to [search] is whether Microsoft is going to be able to use either of its businesses to create a more dominant position in search.”

An example of a condition on the deal could be that Microsoft not include a Yahoo toolbar on Windows at the exclusion of other search toolbars, Mr. Miller said.

Earlier this week, Google’s general counsel aired several antitrust concerns about a Microsoft-Yahoo deal, citing its competitors’ dominance in instant-messaging and e-mail.

According to December figures from ComScore, Yahoo mail’s 82 million users leads both Microsoft and Google, which have 45.7 million and 20.8 million users, respectively. Yahoo’s instant-messaging application, Yahoo Messenger, also leads with 27.3 million users, compared with 18.4 million users of MSN-Windows Live Messenger and 530,000 for Google Talk.

“When you’re talking about e-mail and instant messaging, there’s a lot more players, so that’s probably not as important,” Mr. Miller noted.

Microsoft objected last spring when Google announced a deal with DoubleClick.

Channel Surfing runs Wednesdays. E-mail krow land@washingtontimes.com.

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