Yahoo-Google deal comes under fire from Microsoft

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A proposed online search advertising deal between Yahoo and Google came under fire at a US senate hearing as Microsoft claimed that Yahoo CEO Jerry Yang had himself admitted that the agreement would hurt competition. Speaking before the senate's judiciary committee, Microsoft's general counsel Brad Smith recounted a June 8 meeting at the San Jose airport involving Microsoft chief executive Steve Ballmer, Yahoo CEO Jerry Yang and other company executives during which Yang allegedly said a Google-Yahoo deal would be anti-competitive.

"Yahoo! chief executive, Jerry Yang looked at us across the table and said, 'Look, the search market today is a bipolar market,'" said Smith. He further added, "On one pole is Google and on the other pole are Microsoft and Yahoo! competing with Google. If we do this deal with Google, Yahoo! will become part of Google's pole, and Microsoft will not be strong enough in this market to remain a pole of its own."

Senator Herb Kohl, the subcommittee's chairman, then asked Smith if he was recalling the meeting correctly and reminded Smith that he was under oath. "I just stated exactly what Mr. Yang said and it made such a strong impression," Smith responded to the amazement of Microsoft executives.

He added "Steve Ballmer turned to me and said, 'Think about that, there's only going to be one pole in the market.' I guess that would be a monopole, wouldn't it?" Google announced a non-exclusive agreement with Yahoo last month that will allow the Internet company access to Google's AdSense for search and content advertising programmes in the US and Canada. Microsoft argued that the agreement will give Google an unprecedented level of control over advertising for search on the Internet, up to 90% potentially of all search ads.