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You are here: Home / World Wide Web / Congress, EU To Probe Yahoo Takeover
Congress, EU Will Probe Microsoft-Yahoo Bid
Congress, EU Will Probe Microsoft-Yahoo Bid
By Richard Koman / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
FEBRUARY
04
2008
Congress and the European Union are preparing to take a hard look at Microsoft's $44.6 billion hostile takeover bid for Yahoo.

On Sunday, Google strongly suggested the proposal should be rejected on antitrust grounds. In a blog post, Google chief legal officer David Drummond wrote, "Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers." He added, "There is plenty of time for these questions to be thoroughly addressed."

Congress wasted no time in taking the hint. House Judiciary Committee Chairman John Conyers (D-Michigan) and ranking Republican Lamar Smith (R-Texas) announced Monday that the committee will hold hearings on the proposed leveraged buyout on Friday.

Scrutiny Promised

"Microsoft's bid to acquire Yahoo is certainly one of the largest technology mergers we've seen and presents important issues regarding the competitive landscape of the Internet," Conyers said. The committee's Task Force on Antitrust and Competition Policy will conduct "a careful examination" of the deal, Conyers said.

"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," said Sen. Herb Kohl (D-Wisconsin), chairman of the Senate subcommittee on antitrust.

Neelie Kroes, the European Union's competition commissioner, also said she intends to investigate the merger. Dr Hans Friederiszick, a former EU competition official, told the British newspaper the Telegraph, "If Microsoft bundled search and advertisement facilities into the Windows operating system, this would certainly be a concern."

E-mail, IM Dominance

But what are the merits of antitrust complaints against the combination? Eric Goldman, director of Santa Clara University's High-Tech Law Center, said in a telephone interview that regulators will look at several areas.

"Antitrust law turns on a multifactor analysis and is a little difficult to anticipate," Goldman cautioned. "But we do know that Microsoft has a long and involved history with antitrust regulators. In the search and advertising market there's no question that Microsoft and Yahoo have to catch up with Google."

In addition, Google identified e-mail and instant messaging as two areas where the combined company would have dominant control.

"The IM market is a very confusing market because of lack of interoperability," Goldman said. "That's a known problem and one that needs to be solved. The problems of that industry won't really be changed by the consolidation."

In e-mail, while Microsoft and Yahoo combined may have as much of 75 percent of the market, Google has a very strong competitor in Gmail. And, Goldman said, "I wonder how much of that market share is dormant or lightly used accounts." In any case, Goldman said, "the problem with e-mail is the portability. In theory, regulators could just require Microsoft to offer free forwarding."

Consolidation Inevitable

Ultimately, Goldman said, "consolidation is inevitable." On a number of levels, it makes logical sense, although consolidation is a double-edged sword since it gives each search operator "more power to inject their own biases and norms," he said.

So does the proposed takeover actually favor competition since it gives Google one strong competitor instead of two weak ones? "I think that's a very strong conclusion to reach," Goldman said. "It has procompetitive effects that will push Google to improve their offerings to consumers."

Even though Microsoft fought hard against Google's $3.1 billion acquisition of DoubleClick, which was ultimately approved by the Federal Trade Commission, that decision is unlikely to play in regulators' evaluation of this merger. "That was a very different deal," Goldman said. "The scale of this alliance would dwarf that."

"At this point, the competition between Google and Microsoft is so fierce, both sides are going to claim antitrust fouls with every acquisition," Goldman said.

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