Google, Yahoo seek to avoid antitrust suit: report

(Reuters) - Google Inc and Yahoo Inc are in talks with the U.S. Justice Department in an effort to head off an antitrust challenge to their proposed advertising agreement, The Wall Street Journal said citing lawyers close to the effort.

The settlement negotiations are at an early stage and it isn't clear whether they will resolve U.S. objections or be acceptable to the two companies, the paper said citing the lawyers.

Advertisers, who have raised objections to the deal, told Justice Department officials that the partnership will limit competition, raise prices and reduce choices, the paper said.

Under the agreement, Google would supply Yahoo with advertising services to run alongside Yahoo's own Web search system. Yahoo runs the Web's second most popular search service.

Yahoo struck the agreement in June with Google, the world's dominant supplier of Web search services, as it sought to shore up its advertising business and ward off pressure to merge from Microsoft Corp.

In the settlement talks with the government, both companies have discussed concessions, the paper said.

Even as senior Justice Department officials weigh the companies' proposals to resolve antitrust issues, its trial staff continues to prepare a lawsuit to block the deal, the paper said citing lawyers and executives contacted by the government.

The companies have been cooperating with the Justice Department's investigation and recently agreed to delay implementing the deal until at least October 22 to give federal and state antitrust officials time to complete their separate investigations, according to the paper.

Yahoo, Google and the Justice Department could not be immediately reached for comment by Reuters.

(Reporting by Ajay Kamalakaran in Bangalore)