Yahoo-Google deal faces scrutiny: antitrust experts

By Diane Bartz

WASHINGTON (Reuters) - Google Inc and Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) face intense U.S. Justice Department scrutiny of their deal to share some advertising revenue, and the heat will likely increase under a new administration, antitrust experts said.

Google, with more than 60 percent of the Web search market, and Yahoo, with 16.6 percent, announced a deal last week that would allow Yahoo to place Google ads on its site and collect the revenue.

The firms said Yahoo's cash flow could grow by $250 million to $450 million in the first year under the deal, which Yahoo sought as an alternative to software giant Microsoft Corp's $47.5 billion buyout offer.

Yahoo and Google describe the deal as very limited. "These are still independent companies who will continue to compete aggressively," said Yahoo lawyer Hewitt Pate of law firm Hunton and Williams.

But the deal has raised eyebrows among antitrust lawyers.

Bruce McDonald, a Jones Day antitrust attorney and former deputy assistant attorney general, pointed out that the arrangement could lessen Yahoo's incentive to compete vigorously against Google because Yahoo would collect revenue no matter which company placed an advertisement.

Evan Stewart, of law firm Zuckerman Spaeder, agreed.

"Rhetoric is not evidence," he said. "At the end of the day, you're going to have to show some very effective computer modeling ... to show that consumers are at worst no worse off."