Deals and IPOs

Google Faces Uphill Fight In Blocking Microsoft Bid


Google's effort to raise antitrust concerns about Microsoft's $42 billion bid for Yahoo has several flaws, analysts said.

Mark Lennihan

For starters, regulators pay more attention to the views of customers and consumers than to those of competitors when reviewing consolidation, antitrust attorneys said. On its specific arguments against the acquisition, Google also may not have made the strongest case possible, these attorneys said.

The biggest hurdle when one rival complains about another is that "the regulators suspect the deal might be good for competition," Stephen Houck, a former antitrust enforcer in New York state, said Monday.

"Google has to tread very carefully, lest it have a negative impact," said Houck, who is counsel for a group of states, led by California, that pushed to extend court oversight of Microsoft's landmark 2002 antitrust settlement. A judge recently extended that oversight an additional 18 months, until November 2009.

In a posting on the company's blog Sunday, Google's top lawyer, David Drummond, said Microsoft's bid for Yahoo "raises troubling questions," potentially giving the combined company "an overwhelming share of instant messaging and Web e-mail accounts."

But it's unlikely that antitrust regulators would consider a product like Web-based e-mail a separate market with little competition, experts said.

"Everybody and their uncle has an e-mail account at work," said Robert Litan, a senior fellow at the Brookings Institution and a former antitrust official at the Justice Department during the Clinton administration.

In his blog post, Drummond also asked, "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?"

Yet Microsoft's previous antitrust problems probably won't be a major factor in any review of the Microsoft-Yahoo deal, several analysts said.

The 2002 settlement focused on Microsoft's operating system and browser and barred the software giant from seeking deals with computer makers to exclude competing software.

Microsoft could still put a link to Yahoo's Web site on computer desktop screens without running afoul of the settlement, said Lars Liebeler, antitrust counsel to CompTIA, a computer industry trade association. The group's members include Microsoft, Intel and AT&T, among others.

The company would run into trouble if it tried to force computer makers to keep competing links, such Google's, off the desktop, he said.

Google may gain more traction by arguing that the search market is concentrated, Litan said, even if it is the market leader. Google has 62 percent of the worldwide Internet search market, while Yahoo and Microsoft would have a combined share of 16 percent, according to comScore Media Metrix.

The combination of the second and third largest players in a concentrated market could lead to a duopoly, Litan said, and that would be a good argument for Google.

A Google spokesman would not comment on whether the company would lobby against the deal. But Drummond's post is widely seen as a sign the company will do so.

Microsoft lobbied hard against Google's purchase of online ad company DoubleClick last year. Microsoft helped fund think tank research in opposition to the deal and the two companies' lawyers squared off during a contentious congressional hearing in September.

The Google-DoubleClick deal was approved in December, though it still awaits clearance by European authorities.

"This is tit for tat," Litan said.

Mark Botti, a former official in the Justice Department's antitrust division, said Google can provide regulators with information and analysis about what it sees as the anticompetitive aspects of the transaction. The company could also take its concerns to Capitol Hill.

Microsoft likely prefers that the Bush administration, which has challenged few deals, review the transaction rather than the next administration, Litan said. Most experts think the review would take at least a year.

Yahoo has said little about Microsoft's offer since it was made public Friday, except that its board is considering it. has business relationships with both Yahoo and Microsoft.