Google clout seen aiding antitrust OK for Microsoft

By Diane Bartz and David Lawsky

WASHINGTON/SAN FRANCISCO (Reuters) - Google Inc so dominates the online search and advertising market that regulators are unlikely to challenge a merger of Microsoft Corp and Yahoo, two antitrust experts said on Friday.

The world's biggest software maker sent a letter to Yahoo's board on Thursday night offering $44.6 billion for the Internet media company. Yahoo said on Friday its board will evaluate the offer,

Evan Stewart of Zuckerman, Spaeder LLP said antitrust approval of such a deal was likely because Google was so big, the information technology field was changing so fast and barriers to entering the market were relatively low.

"At the end of the day, it's hard to see how they (regulators) could reject this," said Stewart.

Antitrust enforcers on both sides of the Atlantic typically take a hard look at any merger which knocks the number of major competitors in an industry down from three to two because of the danger the remaining entity could raise prices.

In 2001, HJ Heinz Co called off its acquisition of Beech-Nut after regulators balked because it would have merged the No. 2 and No. 3 baby food makers.

But creating a stronger competitor to Google could appeal to antitrust enforcers.

Google's 77 percent share of the global Web search market, according to Internet audience researcher comScore, vastly overshadows Yahoo, which is second at 16 percent. Microsoft is a distant third at 3.7 percent.

"You want more than one dominant player," said Edward Henneberry, co-chairman of Heller Ehrman LLP's European competition practice, in a telephone interview from London.

In San Francisco, Thomas Barnett, the Justice Department's assistant attorney general for antitrust, was asked about the deal. "We are aware of it," he said tersely.

Sen. Herb Kohl, a Wisconsin Democrat, said the Senate antitrust subcommittee he chairs would hold hearings into the deal if Yahoo accepted Microsoft's offer.

"We will need to scrutinize the deal carefully to ensure that it will not cause any harm to the competitiveness of what has been a vibrant high tech marketplace, nor negatively impact the privacy rights of Internet users," Kohl said in a statement.

But Henneberry said he expected that both European and U.S. regulators would put aside concerns expressed by privacy advocates. "The privacy issues aren't really competition issues."

(Editing by Tim Dobbyn)