Microsoft Yahoo alliance under antitrust scrutiny

Microsoft's proposed partnership with Yahoo is to face tougher scrutiny from US antitrust regulators than initially expected.

Microsoft's proposed partnership with Yahoo is to face tougher scrutiny from US antitrust regulators than initially expected.

Although regulators blocked Yahoo's deal with Google, the proposed alliance with Microsoft joins two much smaller companies and was expected to get easy approval.

The two would-be partners also argue that only by joining forces will they be able to challenge Google's dominance of the search and associated advertising markets.

But antitrust experts have warned that US regulators sometimes oppose mergers between number two and three players, according to the Financial Times.

US authorities have objected to the formation of duopolies in the past because of concerns of collusion to block all other competition, according to a former DoJ official.

The Federal Trade Commission controversially blocked Heinz from buying Beech-Nut, even though Gerber controlled two-thirds of the market.

This means Microsoft could face tough scrutiny from US anti-trust regulators and have to put up a fight as Oracle did to acquire PeopleSoft to boost competition with SAP.

Microsoft also needs approval from European anti-trust regulators, but analysts expect little resistance because of Microsoft and Yahoo's very small market shares in Europe.

The Australian competition watchdog has confirmed it will investigate the proposed Microsoft/Yahoo search partnership, according to local media reports.

The Australian Competition and Consumer Commission is expected to look at the deal's potential impact on local advertising and media markets.

The deal has unusual implications for the Australian market, where both Yahoo and Microsoft operate joint-ventures, through Yahoo7 and Ninemsn.

Meanwhile advertising agencies are urging Microsoft and Yahoo, according to the

FT, to accelerate their search partnership to ensure an effective challenge to Google.

They say the planned two-year integration process is too long as Microsoft and Yahoo could lose focus while Google continues to innovate, particularly in search.

Advertisers are hoping that a stronger competitor to Google will accelerate the fall in prices for search terms already initiated by the downturn.

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