Lawmakers ponder what's worse: A Google/Yahoo deal or a Microsoft/Yahoo marriage?
Lawmakers today tried to cut through the clear antagonism between executives of three warring tech titans -- Google, Yahoo and Microsoft -- to determine which pairing would be worse for the Internet advertising market and consumers: Google and Yahoo or Microsoft and Yahoo.
Several members of the House and Senate raised concerns about Yahoo's deal to outsource some search ads to Google during a pair of congressional hearings. The sessions featured some potentially explosive new testimony about how Yahoo Chief Executive Jerry Yang viewed the effect of the deal on the Internet advertising market. But legislators also tried to grapple with the alternative if regulators were to scuttle the proposed deal -- Microsoft gobbling up some, if not all, of Yahoo.
"Is it not true that your opposition to this agreement between Yahoo and Google is highly motivated by the fact that Microsoft wants to acquire Yahoo itself?" Sen. Herb Kohl, a Wisconsin Democrat and chairman of the Senate antitrust subcommittee, asked Microsoft General Counsel Brad Smith. "And wouldn't such an acquisition be just as anticompetitive as the deal we're talking about this morning?"
Other lawmakers asked versions of the same question during the hearings. In fact, it was the only question that Rep. John Conyers (pictured above), the Michigan Democrat who chairs the the House antitrust task force, had for his panel of witnesses.
Not surprisingly, the answers depended on who was talking. Smith told Kohl that Microsoft would have concerns about a Yahoo/Google deal regardless of any interest in Yahoo because it would harm search advertising competition. But David C. Drummond, Google's chief legal officer, said the prospect of Microsoft buying Yahoo would be worse. He told Conyers:
Yahoo’s staying in the market. They’re going to be a competitor going forward. ... There still will be three large aggressive competitors competing across the board in Internet services. If Microsoft is successful in swallowing up Yahoo, one will be gone.
Conyers expressed concerns about the Google/Yahoo deal. He was bothered particularly ...
ub... that the two companies did not trust him and members of his task force enough to let them see the signed search ad agreement unless they viewed it in a lawyer's office, promised not to take notes and signed non-disclosure forms. "By contrast, the committee was given more ready access to the documents surrounding the president's terrorist surveillance program," Conyers said.
But the lawmaker also didn't appear to be very sympathetic to Microsoft's arguments that the Yahoo deal would make Google even more dominant online. "I never felt so sorry for poor, little old Microsoft," Conyers sardonically told Smith.
While lawmakers on both committees by and large didn't know much about how search advertising works, they all appeared to be aware of Microsoft's unsuccessful pursuit of Yahoo. And the dance the three companies have been doing the last six months colored both hearings, with sharp comments between the Google, Yahoo and Microsoft executives. You can download copies of their formal Senate testimony here.
Congress has no formal role in determining whether the Google/Yahoo deal will go forward. That's up to the Department of Justice, which is reviewing the deal, as well as attorneys general in several states. But members of both committees made it clear they are watching. That could be significant if Democrats retain control of Congress and win the White House in November.
-- Jim Puzzanghera
Puzzanghera, a Times staff writer, covers tech and media policy from Washington, D.C.
Photo by Chip Somodevilla / Getty Images