Many in the antitrust community raised their eyebrows last month after Yahoo! spurned Microsoft’s proposal and fled to an advertising partnership with Google. Instead of two “fringe” companies joining to compete with the dominant company, one fringe company joined the dominant one. The proposed partnership would use Google’s ad technology to place ads next to Yahoo! search results.
The companies are voluntarily sharing information about the deal with U.S. Department of Justice before officially launching the alliance, but the outcome of the investigation is uncertain. In an interview with computerworld.com, Boston University School of Law professor Keith Hylton explained that historically, mergers have been deemed anticompetitive when a dominant firm joins with another firm what has only one percent of the market. In contrast, Yahoo! accounts for about 20 percent of the market. Hylton said that courts could apply the merger case law to a monopolization inquiry because the Google Yahoo! partnership appears to have a competition-avoiding effect.
Others contend that Google already had a monopoly of the market at nearly 70 percent of all searches. In addition, there is an argument that a Google-Yahoo! alliance will be similar to existing supplier arrangements in other fields such as the printer and appliance industries
The outcome of the DOJ’s antitrust investigation into the Google-Yahoo! deal may be uncertain, but there is no doubt that the result will substantially affect the future of online advertising. Our next blog entry will examine those ramifications.
