!!!!! Would YaMicrohoosoft! hamper market competition? If Jerry Yang finally agrees to be swallowed by Steve Ballmer, that's a question for regulators in the US as well as the EU. But first, another question needs answering: Which US regulator will review the acquisition: the Department of Justice (DoJ) or the Federal Trade Commission (FTC)?
"There will likely be an arm-wrestling contest between the Justice Department and the FTC on this," says Mark Ostrau, co-chair of the antitrust and unfair competition group at the Silicon Valley law firm Fenwick & West. "Both have claims to this in one way or another."
The FTC typically handles deals in the online advertising market. It just reviewed Google's acquisition of online-ad firm DoubleClick. But the DoJ is, shall we say, more familiar with Microsoft.
In 1998, the Department of Justice joined 19 US states and the District of Columbia in filing antitrust lawsuits against the Redmond software giant over its Windows operating system and applications, and ever since settling with Microsoft in 2002, the DoJ has monitored the company's business operations in accordance with an antitrust consent decree.
If Yahoo! approves the proposed $44.6bn deal, the two regulators will sit down at the bargaining table to determine which one is better equipped to review it.
"There is a clearance process between the two agencies so that they never look at the same transaction," says Howard Morse, a former assistant director of the bureau of competition at the FTC and now a co-chair of the anti-trust practice at the stateside law firm Drinker, Biddle & Reath.
Whichever regulator tackles the task, the other may provide assistance. "There have been very rare situations where there's been some sharing of expertise, where staff of one agency was 'on loan' to the other," explains Ostrau. "And this could be one of those rare occurrences."
But as we see it, the DoJ should take the lead, since the issues at hand outstrip the FTC's traditional online ad-watching domain.
If Yahoo! and Microsoft merge, their combined online ad operation still wouldn't match the one headquartered in Mountain View. Google controls 60 per cent of the search market, and DoubleClick, which Google will buy as soon as regulators let it, is by far the dominant player in the display ad market.
"Right now, you have one player that owns the market: Google," says Ted Henneberry, co-chair of the European practice group at the international law firm Heller Ehrman, who's dealt with anti-trust issues on both sides of the Atlantic.
But a Yahoo!-Microsoft deal would extend well beyond the online ad market. "There would be concern with significant consolidation in a number of areas," says Ostrau. "There's certainly the advertising market, including search advertising and other areas of online advertising. But we're also talking about consolidating two web-based email systems, two online communities, and so on."
The big question is whether Microsoft would gain an unfair advantage by dovetailing Windows with Yahoo!'s search and ad technologies. "There is a potential for Microsoft to leverage its operating system," says Ostrau.
Couldn't Microsoft pull this trick with its home-grown online technologies? Of course. Google has specifically asked to the DoJ to prevent Redmond from doing so. But this becomes an even bigger issue if Microsoft acquires Yahoo!
"When Internet Explorer was first used with Windows, it wasn't that good. People still used Netscape," says Ostrau. "But once Internet Explorer was good enough, the bundling had a big effect. It's one thing to put MSN search on Windows. It's another to put Yahoo! on there too. The more attractive a technology, the more effective the bundle."
Clearly, this is a job for the DoJ.
Let's just hope they can keep a straight face. First, the DoJ slaps Microsoft for monopolistic practices in the operating system market. Then Microsoft complains that Google is threatening to build a monopoly in acquiring DoubleClick. And then it turns around and tries to acquire Yahoo!, an acquisition that makes the Google-DoubleClick deal look piddling.
"Every company is guilty of talking out of both sides of their mouth," says Ostrau. "But regulators understand that."
And then there's the bigger question: If Microsoft acquires Yahoo!, what happens to The Register's Yahoo! headlines? ®