A search advertising deal proposed in June between Yahoo and Google faces two new obstacles, as the European Union Competition Commission said that it has been investigating the agreement between the top two search engine firms.
Austin, TX (RUSHPRNEWS) 09/16/2008–Â A search advertising deal proposed in June between Yahoo and Google faces two new obstacles, as theEuropean Union Competition Commission said that it has been investigating the agreement between the top two search engine firms. Earlier Monday an organization representing 18,000 newspapers worldwide, the World Association of Newspapers, said that it had asked antitrust regulators in North America and Europe to halt the proposed deal between Yahoo and Google, which has recently come under heightened criticism by advertisers.
Informal Investigation Underway Since July, Group Reveals
The antitrust authority of the 27-nation European Union announced today that it had been examining the proposed deal since July to determine what impact it could have on European markets, despite reassurances from Google and Yahoo that the deal would only affect Web properties in North America.
The proposed deal, which could extend as long as a decade should all optional renewals take place, would allow the Mountain View, California-based top search engine firm Google to provide ads alongside search results from the second most popular search engine firm Yahoo, as well as on some of its United States and Canada Web properties.
The nonexclusive search advertising deal would place ads from Yahoo and Google into online auctions that other firms would be open to take part in – a measure put in place to try to help gain the approval of both U.S. and European Union antitrust regulators.
In June Google said that although the partnership with Yahoo did not require the approval of regulators, it had decided to delay implementation of the plan by up to 105 days in order to allow the Department of Justice time to review it.
Yahoo said in June that the agreement with Google would lift the firm’s operating cash flow some $250 million to $450 million during its initial year, and that it had the opportunity to bring in as much as $800 million in annual revenue to the firm.
Price-fixing And Sharing Of Sensitive Business Information Among Possible Violations
Jonathan Todd, a spokesman for European Competition Commissioner Neelie Kroes, revealed Monday that the group had opened an investigation into the deal less than a month after Yahoo and Google announced their plans to form a search advertising pact. “In mid-July, we decided to open a preliminary investigation on our own initiative into potential effects of the Google-Yahoo agreement on competition in the European Economic Area market,” Todd said in a recent Reuters report.
The Brussels-based commission’s informal review has looked into possible violations of European Commission price-fixing rules by the Yahoo-Google agreement, as well as improper sharing of sensitive business data, according to Todd. “The European Commission is looking at possible effects of the Yahoo-Google agreement on the European Economic Area market in relation to EC Treaty rules on restrictive business practices,” Todd said in recent Los Angeles Times report.
Todd said that both Yahoo and Google had voluntarily provided the commission with information on the proposed tie up, which was also facing review by regulators at the U.S. Justice Department and attorneys general in eleven states. No deadline had been set for the conclusion of the EC investigation, Todd said.
Responding to the EC investigation, Google spokesman Adam Kovacevich said the Internet giant was cooperating with regulators, and reiterated the company’s position that the proposed tie-up would effect only the North American market. “The agreement is limited in scope to Yahoo’s U.S. and Canadian websites, and it will not have any significant effect on Europe,” Kovacevich said Monday morning. “We are of course cooperating with the commission and are confident that they will reach the same conclusion,” he added.
Giant Newspaper Group Second In Last Week To Oppose Pending Deal
Yahoo said that it too would provide information to the E.U. commission and continue to work with the organization’s regulators, in a statement the Sunnyvale, California-based firm released Monday.
European Commission scrutiny was seen as likely to be even more aggressive than what Yahoo and Google have encountered to date by the Justice Department. Last week reports surfaced that the Justice Department had hired a high-profile antitrust lawyer, Sanford Litvak, for what may become a court battle over the proposed Yahoo-Google deal.
Paris-based newspaper group the World Association of Newspapers (WAN), which represents 77 national newspaper associations, announced Monday that it had sent letters to regulators in Canada, the U.S. and the E.U. detailing its opposition to the pending Yahoo-Google search advertising deal. Todd said that the EC had not yet received the WAN letter, and that it had begun its review independently.
WAN urged regulators to stop the deal from taking place due to antitrust concerns. “WAN believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising,” WAN president Gavin O’Reilly said.
“In our view the proposed advertising deal between Google and Yahoo would seriously weaken that competition, resulting in less revenues and higher prices for our members. WAN is also concerned that this deal would give Google unwarranted market power over important segments of online advertising,” O’Reilly added.
Yahoo-Google Search Deal Comes Under European Union Review
In the letter WAN sent to EC director Cecilio Madero, the organization said that the Yahoo-Google deal would have harmful effects in E.U. countries. “Many of our European members are active in North America and will be directly harmed by anti-competitive conduct there,” Madero said.
“We believe the deal will result in reduced incentives for Yahoo to compete against Google, even in Europe,” Madero added.
WAN warned that the tie-up between Yahoo and Google, which have an even greater combined hold on online advertising in Europe than in the U.S., could hurt competition. “Because Google and Yahoo together control over 95 percent of advertisers’ search advertising spending in Europe, the two companies could easily set the conditions for competition in the E.U. if they chose to do so,” Madero said.
The letters of opposition from WAN represented the second major obstacle from a newspaper group in less than a week for Yahoo and Google. Last week the Association of National Advertisers voiced its objection to the proposed deal, in a letter the large trade group sent to Justice Department regulators.
The objection filed by the ANA, one of the biggest advertising trade groups in the U.S. representing about 400 companies including such large firms as General Motors Corp. and Proctor & Gamble, was seen as a blow to Justice Department approval of the proposed Yahoo tie up with Google.