UPDATED: U.S., EU Unlikely To Stop Microsoft Deal
U.S. and European antitrust regulators aren't likely to prevent Microsoft
from buying Yahoo
, analysts said Friday, though scrutiny of the deal could
drag on for months.
A major factor weighing in Microsoft Corp.'s favor, analysts said, is Google
Inc.'s dominance in the online search and advertising businesses -- the two
areas regulators are likely to focus on when weighing market power issues raised
by the nearly $45 billion unsolicited bid.
The Justice Department said it is "interested" in reviewing competition
issues raised by Microsoft's surprise offer. The Federal Trade Commission and
European Union officials declined to comment. If the deal goes through, analysts
expect Congress and European regulators to review the combined company's increased
"I don't see this just sailing through, regulators will look at it,"
Ted Henneberry of the London law firm Heller Ehrman said. But even after a review
that could take up to six months, he said a Microsoft-Yahoo combination isn't
likely to be stopped because the new entity's share of the online ad space would
still be dwarfed by Google, which already controls nearly 60 percent of the
U.S. search market.
"The fact that Google dominates this business will be a big factor in
[Microsoft's] favor in trying to get this approved by the regulators,"
said Keith Hylton, a professor of antitrust law at Boston University.
Alternatively, a combined Yahoo Inc. and Microsoft -- which are the second
and third largest U.S. search engines -- could ease concerns about Google's
growing power in the ad space. By combining, Microsoft and Yahoo would have
a 33 percent share of the U.S. search market, according to the latest data from
comScore Media Metrix.
The Federal Trade Commission in December approved
Google's $3.1 billion purchase of online advertising company DoubleClick
Inc., but European Union regulators are still
examining the deal and Google has said it won't go forward without their
lobbied hard against the deal, arguing that it would give Google a dominant
position in the online ad market.)
The FTC's OK of the Google-DoubleClick deal surely influenced Microsoft's decision
to bid for Yahoo, said Joseph Turow, a professor at the University of Pennsylvania's
Annenberg School of Communications who has been critical of the agency and fears
that industry consolidation will be bad for consumers.
"Despite the appearance of unlimited choice in the new media environment,
people's online activities will be tracked and shaped by a very small number
of companies who care far more about surveillance and targeted advertising than
the public interest," Turow said.
Marc Rotenberg, executive director of the Electronic Privacy Information Center,
agreed and said "the problem of profiling Internet users will become more
severe if mergers go forward without appropriate privacy safeguards."
Many Wall Street analysts expect regulators to approve the transaction, which
Yahoo said it will "carefully and promptly" study.
Sen. Herb Kohl, D-Wis., chairman of the Senate antitrust subcommittee, said
the same issues that prompted lawmakers to review the Google-DoubleClick deal
exist in a potential Microsoft-Yahoo combination, including examining how it
affects consumers, advertisers and businesses "who increasingly use the
Internet for their news, commerce and entertainment."
If Yahoo accepts Microsoft's offer, the subcommittee expects to hold hearings
to "explore the competitive and privacy implications of the deal,"
A federal judge this week extended
by 18 months court oversight of Microsoft's market power, which began in
2002 after a landmark antitrust settlement. Hylton said Justice has been relatively
lenient with Microsoft, compared to state attorneys general who pushed for the
extension of court oversight of the software giant. Justice officials said the
2002 antitrust settlement had largely served its purpose and should expire.
Shares of Yahoo added $8.84, or 46.1 percent, to $28.02 in afternoon trading,
while Microsoft fell $2.15, or 6.6 percent, to $30.45.