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Microsoft-Yahoo deal draws antitrust probe

business Updated: Sep 12, 2009 08:09 IST

The US Department of Justice is looking into the advertising and search alliance between Microsoft and Yahoo, the companies said on Friday.

Yahoo and Microsoft, which trail a distant second and third respectively to Google in the internet search market, announced their deal in late July in a bid to combine forces and challenge the web giant.

Under the arrangement, Microsoft will provide search and related advertising tools on Yahoo's pages, in return for a 12-per cent revenue cut during the first five years of the deal. Yahoo estimates the pact will add $500 million to annual operating income while cutting capital expenses by $200 million.

While the antitrust probe had been expected, analysts say that the Department of Justice is unlikely to block the deal since the two companies' combined share of the market would still be less than half held by Google.

Both companies said they did not expect the deal to face antitrust obstacles. "As we said when the agreement was announced, we anticipated that this deal will be closely reviewed and we are hopeful it will be approved by early 2010," Microsoft spokesman Jack Ward said.

Yahoo stated that both companies "firmly believe that the information we will be providing will confirm that this deal is not only good for both companies, but it is also good for advertisers, good for publishers, and good for consumers."

According to web tracking firm Comscore, Google controls about 65 per cent of the US search market, compared to Yahoo's 20 per cent and Microsoft's 8 per cent.