The deal that allows Google to provide some advertising for Yahoo searches has unsurprisingly attracted a formal antitrust probe from the Department of Justice. The fact that the Bush Administration’s Department of Justice, comfortably hands-off in recent years, has begun a formal investigation is not good news for the deal. As a report notes, attorneys for Yahoo and Google believe that the deal is “pro-competition.” Opponents feel that the deal will prevent Yahoo from wanting to compete with the hand that feeds it a portion of its advertisements.

This is a classic example of the adage “if you can’t beat ‘em, join ‘em.” Yahoo just failed to consummate a deal that was primarily designed to allow the firm to more fully compete with Google. Weeks later, both firms’ arguments that a combined deal is pro-competition is a tricky pill to swallow.

So why even try it? The two firms are unlikely bedfellows because each is able to use the other to its own ends at the present point in time. The Google deal provides Yahoo with an “out” from Icahn, Microsoft, and Yahoo shareholders all clamoring for a deal. The primary beneficiary of an independent Yahoo? Google. The search leader has little interest in anything but the status quo: Google dominance in search marketing. Keeping Yahoo independent helps to maintain that status quo. Adopting the famous quote from Sun Tzu, Google truly believes it is best to “keep its friends close, and its enemies closer,” at least until the Department of Justice has its say.


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