Microsoft, Google fight over Yahoo

WASHINGTON: Google and Microsoft will spar today at a congressional hearing called to examine whether Google's revenue-sharing deal with No 2 search rival Yahoo will harm competition. Google, with more than 60 per cent of the Web search market, and Yahoo, with 16.6 per cent, announced a deal on June 12 that would allow Yahoo to place Google advertisements on its site and collect the revenue.

The deal, which the firms have said would garner Yahoo at least $250 million in the first year, was widely seen as an effort by Yahoo to fend off Microsoft's on-again, off-again efforts to buy all or part of Yahoo.

Microsoft's most recent offer to acquire Yahoo's search business was rejected by Yahoo. Google chief legal officer David Drummond, defending his company's deal with Yahoo in written testimony for Tuesday's hearing, took a shot at Microsoft's 90 per cent share of the personal computer operating system market.

"Dominance of the desktop can let one company favor its own products and services and obstruct the interoperability of competing products or services, overriding the desires of consumers," said Drummond in testimony prepared for the Senate Judiciary Committee's antitrust panel.

Microsoft General Counsel Brad Smith hit back, saying Google's deal would reduce Yahoo's incentive to compete against Google, would push Yahoo's search advertising platform into a downward spiral and establish an illegal price floor.

"When it comes to the issues before this subcommittee, Google should not be allowed to achieve an outcome through an agreement that it would not be permitted to achieve otherwise," said Smith in his written testimony.

The revenue-sharing deal has not been implemented by Google and Yahoo while they wait for an opinion from the Justice Department's Antitrust Division. Several state attorney generals have expressed concern about the arrangement.

"Microsoft believes the Google/Yahoo deal harms competition in several critical ways. Advertisers and online content providers would be harmed through price coordination that will establish higher prices and limit choice," said Smith. "Consumers would be put at risk as Google expands its ability to collect the personal information of users passing through its search gateway. On an even more fundamental level, Google's monopoly power would increase its ability to shape what people get to see and experience online."

The House Judiciary Committee's antitrust subcommittee will hold a similar hearing later on Tuesday.

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