Antitrust group urges limits on Google, Yahoo deal

WASHINGTON (Reuters) - Google and Yahoo's deal to let Google place some ads on Yahoo's search pages, which the Justice Department is reviewing, should be allowed with limits, the American Antitrust Institute said on Tuesday.

Because the search advertising market is already extremely concentrated with Google by far the dominant firm, the institute argued that consumers would be best served if No. 2 Yahoo remained independent.

Google's market share of U.S. web search widened to 63 percent in August, while Yahoo dropped to 19.6 percent and Microsoft slipped to 8.3 percent, according to comScore Inc.

"Prohibiting Yahoo from using Google ads could result in Yahoo's acquisition by Microsoft, which would effectively remove Yahoo from the market," wrote Norman Hawker, who teaches at Western Michigan University and is a fellow at the AAI.

The AAI is a nonprofit think tank that studies antitrust issues.

At the Justice Department, Thomas Barnett, the assistant attorney general for antitrust, declined to discuss the government's assessment of the deal. "We are obviously looking at the issues and trying to work through them," he told reporters.

In June, Google and Yahoo announced a deal that would allow Yahoo to place some Google ads on its search results. The arrangement has been widely seen as a effort to help Yahoo fend off Microsoft by helping it earn another $800 million annually.

Advertisers have worried that the deal will mean they will have to dig deeper to buy ads, and Hawker urged the Justice Department to consider their concerns.

He urged the department to consider barring Yahoo from using Google ads to replace less lucrative Yahoo ads, barring Google and Yahoo from setting minimum prices on its advertising auctions, barring Yahoo from using Google ads on free or "organic" search results outside North America or on any third-party web site.

(Reporting by Diane Bartz; Editing by Brian Moss)