California lawmakers are speaking out in defense of the controversial deal between Google and Yahoo, which would allow Yahoo to use Google search ads.
Several policy-makers from Silicon Valley, including U.S. Reps. George Miller and Sam Farr, are asking the Department of Justice to think twice before stopping the agreement between the two Internet search giants.
In a letter to U.S. Attorney General Michael Mukasey, the group of 11 politicians expressed concern that the DOJ is considering a preemptive lawsuit to block the deal and said the move would send chills through the industry. Such a lawsuit would also stop future agreements between companies that would fear being scrutinized, they said.
"The rapid growth of the market and increased potential in this space invites more and more competition," the letter says. "However, this growth and innovation could be stifled if the DOJ blocks this agreement."
"They are focused like a laser beam on the express in terms of the agreement, and they ignore the agreement's probable consequences," Norman Hawker of the American Antitrust Institute told us Tuesday. "Contrary to the letter, similar agreements are not commonplace because industries with this level of concentration are not commonplace."
Hawker went on to say that it is "disappointing" that members of Congress did not identify or call for any safeguards that would ensure Yahoo's continued presence in the market.
Yahoo executives would not comment on the details of the voluntary review process with the DOJ except to say they are cooperating with regulators and will continue to do so, but Yahoo spokesperson Tracy Schmaler did say, "We believe strongly that this agreement will strengthen Yahoo's competitive position in online advertising and will help drive a more robust, higher-quality Yahoo marketplace for our advertisers, publishers and users."
Beginning in October, Yahoo said it plans to phase in the agreement in a series of carefully planned steps.
Regardless of whether regulators have reached a decision, Google also said it is moving forward with its plans for implementation. The company did not respond to a request for comments by publication time.
The push from California lawmakers comes after months of scrutiny and opposition against the agreement from advertising associations, including the World Federation of Advertisers and the Association for National Advertisers, and technology groups, including the Center for Digital Democracy. Last week, the American Antitrust Institute put out a white paper offering suggestions on how the companies could proceed and remain competitive.
"If you ignore the economic text when you read the words, you can easily be misled into thinking the agreement is harmless," Hawker said. "Read in context, however, the words of the agreement explain how Google could easily acquire Yahoo's paid-search business."
Google and Yahoo have been defending their deal, denying allegations that the agreement will give Google 90 percent control of the market and potentially hurt Yahoo's business.
"This agreement will not extend Google's share of the market -- Google simply agreed to make its inventory of search advertising available to Yahoo, entirely at Yahoo's discretion," Yahoo says on its Web site.