Senator vows close scrutiny of Google-Yahoo deal

By Peter Kaplan

WASHINGTON (Reuters) - The chairman of a U.S. Senate antitrust subcommittee said on Thursday lawmakers would "closely examine" the collaboration between Google Inc (GOOG.O) and Yahoo Inc (YHOO.O), but antitrust lawyers said the deal would probably not meet trouble with antitrust authorities.

Democratic Sen. Herb Kohl of Wisconsin said the deal between Google and Yahoo "raises important competition concerns."

"The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further in the Antitrust Subcommittee," Kohl said in a statement.

The two companies announced the Web advertising resale pact on the same day that Yahoo said it had ended all talks with Microsoft about a partial acquisition of Yahoo. Last month, Microsoft called off talks on a full-scale Yahoo merger.

The Google-Yahoo partnership "is an important model; a new one in the (Internet) industry; and a common one in other industries," Google CEO Eric Schmidt told Wall Street analysts on a conference call on Thursday, referring to how companies in mature industries often are forced to both compete and cooperate with one another.

Google studied similar non-exclusive pacts in other industries while working out a deal with Yahoo, Google's General Counsel Kent Walker told Reuters in an interview.

"We see this as very much analogous to Toyota selling hybrid technology to General Motors and competing in the overall market, or Canon providing laser printer engines to HP and competing in the laser printer market," Walker said.

"It's a pro-competitive thing when one competitor has technology to bring efficiency gains to the whole market," he added.

The Google-Yahoo collaboration does not need up-front approval from U.S. antitrust authorities since the two companies are not merging. However, the government could challenge the arrangement in court if it concluded that it would restrain competition between them.

Antitrust lawyers said that was not likely, however, since the deal is not exclusive and leaves Yahoo free to pursue its own advertising business and to partner with other companies in the business.

"I can't visualize this being a problem," said antitrust lawyer Stephen Axinn, of the firm Axinn, Veltrop & Harkrider LLP. "It seems to me not to be an anti-competitive contract on its face."

The main question antitrust officials will look at, Axinn said, is whether the arrangement would lock out competitors or eliminate competition. "And I don't think it does either one," he said.

Another antitrust lawyer, who requested anonymity, said that a legal challenge is even more unlikely under the Bush administration, which has taken a conservative view of antitrust enforcement.

"It's always possible, (but) it's not very likely," this antitrust lawyer said.

(Additional reporting by Anupreeta Das in San Francisco, Editing by Gary Hill)