Google clout seen aiding Microsoft antitrust OK

By Diane Bartz and David Lawsky

WASHINGTON/SAN FRANCISCO (Reuters) - Google Inc (GOOG.O) so dominates the online search and advertising market that regulators are seen approving any merger of Microsoft Corp (MSFT.O) and Yahoo (YHOO.O) after giving the deal a close look, antitrust experts said on Friday.

The world's biggest software maker sent a letter to Yahoo on Thursday offering $44.6 billion for the Internet media company. Yahoo said on Friday it 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.

William Mahnic, who teaches mergers and acquisitions at Case Western University, agreed, saying Yahoo's and Microsoft's market shares together total considerably less than Google's.

"The big thing here is that Google has such a huge share," said Mahnic, who forecast the deal would be approved with neither company forced to divest any assets.

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 entities could raise prices.

In 2001, HJ Heinz Co (HNZ.N) 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 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.

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

The deal was announced as the Bush administration enters its final year. Some legal experts say the Bush administration's antitrust regulators have been friendly to mergers and forecast a change if a Democrat wins the White House in the November election.

Sen. Herb Kohl, a Wisconsin Democrat, said the Senate antitrust subcommittee he chairs would hold hearings 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.