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European regulators looking into Google-Yahoo advertising deal

September 15, 2008 |  9:51 am

The European Union's Competition Commission said today it was reviewing Google's proposed Web search advertising pact with Yahoo, another potential roadblock to a deal that is drawing increasing fire from advertisers.

EU Competition Commissioner Neelie Kroes Jonathan Todd, a spokesman for the competition commission, told The Times that an informal review began in July. Although Google and Yahoo have limited their deal to the United States and Canada, the cooperation between the two companies could violate European Commission rules on price-fixing and sharing of sensitive business information, he said.

"The European Commission is looking at possible effects of the Yahoo/Google agreement on the European Economic Area market in relation to EC Treaty rules on restrictive business practices," Todd said.

If the commission decides to launch a formal investigation, it could pose major problems for Google and Yahoo. Under Competition Commissioner Neelie Kroes (pictured above), European regulators have been more aggressive than U.S. officials about enforcing antitrust regulations in recent years.

Google spokesman Adam Kovacevich said this morning the Mountain View, Calif., company was cooperating with European regulators.

"The agreement is limited in scope to Yahoo's U.S. and Canadian websites, and it will not have any significant effect on Europe," he said. "We are of course cooperating with the commission and are confident that they will reach the same conclusion."

A Yahoo spokesman did not immediately respond to a request for comment.

The informal European review comes as U.S. Justice Department antitrust regulators study the deal, along with ...

... attorneys general in California and 10 other states. Last week, the Wall Street Journal reported that the Justice Department had hired a well-known antitrust litigator, Sanford Litvak, in an indication it may be preparing to challenge the Google/Yahoo ad deal in court.

Under the deal, which was announced in June, Yahoo would replace some of the text ads it places next to its search results and on websites with more valuable ads brokered by Google. Both companies would share the money paid by advertisers when Web users click on the ads. Google and Yahoo have said the deal doesn't pose antitrust issues because the deal is not exclusive, allowing the companies to strike similar partnerships with others.

Google and Yahoo agreed to delay implementing the deal for 105 days to allow for a Justice Department review.

But the deal between the top two search engines triggered strong objections from rival Microsoft. And recently some groups have publicly stated their opposition. On Sept. 7, the Association of National Advertisers, which represents 400 companies, including Procter & Gamble and General Motors, told the Justice Department it opposed the deal.

And today, the World Assn. of Newspapers, a Paris-based consortium of national newspaper groups (including the Newspaper Assn. of America) that represents 18,000 papers worldwide, asked regulators in the United States, Canada and Europe to stop the deal. The group said the deal would result in less ad revenue for newspapers. In a communique, the group said:

Google and Yahoo today are the two leading suppliers of content ads and syndicated search ads to online news sites, and they compete intensely for that business. This competition forces each company to offer the best possible terms and helps ensure that newspapers earn a fair market return for the right to display ads and search boxes on their sites. The proposed deal will fatally weaken Yahoo as a competitor for these deals.

Todd, the spokesman for Europe's Competition Commission, said the commission had not yet received the group's letter. It had started the review on its own initiative, he said.

-- Jim Puzzanghera

Photo: European Union Competition Commissioner Neelie Kroes at a Brussels news conference in July. Credit: Benoit Doppagne / European Pressphoto Agency

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