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Google, Yahoo face EU probe
(China Daily)
Updated: 2008-09-17 07:51
Google Inc and Yahoo! Inc face a European Union antitrust probe into their planned advertising partnership, adding to US scrutiny and heightening concern that the deal may unravel. The Brussels-based regulator for the 27-nation EU started investigating the agreement in July on its own initiative, Jonathan Todd, a spokesman in the commission's antitrust unit, said in a telephone interview on Monday. The companies voluntarily submitted information on the partnership, he said. The European probe hurts the chances of the agreement being completed, said Colin Gillis, an analyst at Canaccord Adams Inc in New York. Google, the most popular Internet search engine, has less to gain from the partnership, and scrutiny of the deal in the US and Europe may lead to more examination of Google's other businesses, he said. "What seemed like a relatively simple arrangement definitely may have long term ramifications for Google," Gillis said. He has a "hold" rating on Yahoo and recommends buying Google shares. "They've opened the box. They've opened themselves up to the scrutiny." Under the agreement, Yahoo will display Mountain View, California-based Google's ads next to some of its own search results. The companies said in June they would give the US government three and a half months to review the partnership, even though they indicated it wasn't legally necessary. The US Justice Department said last week it hired antitrust lawyer Sanford Litvack, indicating the government may raise an antitrust challenge to the partnership. Microsoft Corp and the 400-member Association of National Advertisers trade group have said the deal will drive up ad prices. The European Commission is examining possible effects of the Yahoo-Google agreement in Europe and whether it breaches EU rules on restrictive business practices, Todd said. "The agreement is limited in scope to Yahoo's and Google US sites, and it will not have any significant effect on Europe," said William Echikson, Google's spokesman in Brussels. "We are, of course, cooperating with the Commission and are confident they will reach the same conclusion." Yahoo will continue to work with regulators and provide information, spokeswoman Tracy Schmaler said in a statement. The deal will strengthen competition and make advertising more relevant, she said. Google fell $3.80 to $433.86 in Nasdaq Stock Market trading at 4 pm New York time. The shares have declined 37 percent this year. Yahoo dropped 23 cents, or 1.2 percent, to $18.85 and has lost 19 percent this year. Regulators in Europe may be concerned the agreement will lead to the companies cooperating worldwide, increasing their knowledge about each other's prices, said Simon Pilsbury, an economist specializing in competition issues at the Oxera consulting firm in Brussels. When announcing the deal in June, Yahoo said it may add as much as $450 million in operating cash flow in the first 12 months. Agencies (China Daily 09/17/2008 page16) |
