Microsoft-Google-Yahoo Squabble Plays Out in Senate

by Chloe Albanesius

Microsoft, Google, and Yahoo clashed Tuesday during a contentious Senate hearing that saw Yahoo and Google vigorously defend their ad partnership as healthy competition, while Yahoo slammed Microsoft's continued efforts to acquire Yahoo.

"This is a commercial arrangement between two companies who will remain autonomous and compete aggressively – in search and display advertising, mobile, news, e-mail, finance – you name it," Michael Callahan, Yahoo's general counsel, told the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights. "Yahoo is here to stay and we intend to compete across countless platforms, including search, for years to come."

"Supplier arrangements are commonplace in many industries," said David Drummond, senior vice president of corporate development and chief legal officer at Google. "Canon supplies laser printer engines to Hewlett Packard, while also competing in the sale of laser printers."

Last month, Google announced a non-exclusive agreement with Yahoo that will allow the Internet company access to Google's AdSense for search and content advertising programs in the U.S. and Canada. Google stressed that the deal was not a merger, just a business partnership, but the deal has drawn scrutiny from lawmakers who want to make sure the arrangement does not run afoul of antitrust laws.

Among the detractors is Microsoft, which has been trying for months to acquire Yahoo. Yahoo last weekend rejected a proposed ad deal from Microsoft, and now billionaire investor and Yahoo shareholder Carl Icahn has launched a proxy fight for Yahoo in an effort to secure a takeover deal for Microsoft.

Microsoft, Google, and Yahoo "are laser focused on being significant players in search," Callahan said. "With this business arrangement, Yahoo will continue to execute on its long term corporate strategy. Microsoft, on the other hand, has turned to activist shareholder Carl Icahn, in the apparent hope that this will force a fire sale of Yahoo's core strategic search business."

Yahoo will not "allow our business to be dismantled or sold off piecemeal on terms that would be disadvantageous to Yahoo stockholders and to the market as a whole," Callahan pledged.
Brad Smith, Microsoft's vice president and general counsel, painted the software giant as a company just trying to keep up in a Yahoo-Google world.

A Google-Yahoo match up will create an unprecedented level of concentration in search advertising, produce fewer choices for advertisers, result in higher prices, and create privacy concerns, he said.