Google's Antitrust Trouble

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Publishers are also concerned. They worry that the deal will reduce the share of revenue the search giants give to partner Web sites. On Sept. 15, the World Association of Newspapers, which represents 18,000 newspapers worldwide, called on the U.S. Justice Dept. and European antitrust authorities to block the deal. "Wan believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites " said WAN president Gavin O'Reilly in letters to the Justice Dept., the European Commission's Competition Directorate, and the Competition Bureau of Canada, made public on WAN's Web site.

Is Microsoft Overplaying the Threat?

Another concern for opponents is what might happen to publishers if Yahoo disappeared as an alternative to deliver ads on their sites. Blogs, small Web sites, and even large online publications that rely on Google or Yahoo to supply ads could find it more difficult to argue for a significant share of the pie if Google became the only significant partner for search-related ads. "I see it as far more realistic that Google would cut back on its share of revenue to Web sites," Hawker says.

Google says Microsoft is helping magnify potential problems with the deal. Microsoft (MSFT) tried to buy Yahoo earlier this year in a bid to narrow Google's lead in the online advertising market. An attorney familiar with Google's thinking says Microsoft is overplaying the threat in a bid to get Yahoo back to the negotiating table. Microsoft didn't respond to a request for comment, but executives of the company have in the past made no secret they think the deal should be blocked, saying it will give Google too much sway over the market.

Not so, says the attorney, who asked not to be identified. He notes that Google is taking measures that would guard against giving the two companies an unfair advantage against competitors. For example, Google will not be privy to information such as the IP addresses of the computers that clicked on its ads on Yahoo's sites—data Google could use to show similar ads to those computers if it detects them other than through Yahoo. "This is a nonexclusive agreement where one company can draw on the superior technology of another," says the attorney. "This kind of arrangement, historically, has not generated challenges.…But Microsoft is waging a huge lobbying and PR battle against the deal."

Possible Justice Dept. Restrictions

The best argument for the deal may be the question of what happens to Yahoo if it can't partner with Google. Yahoo can use Google's expertise in search to help it reduce costs and hang on to the cash it needs to stay independent—and ultimately, be a viable contender.

Rather than quash the deal altogether, the Justice Dept. could impose conditions aimed at fostering continued competition. First, the government could require that Yahoo only use Google's search results on categories where it lacks advertisers. Another condition could be to demand that Yahoo impose restrictions on how much inventory it could give to Google over time, ensuring that even if Yahoo one day gets out of the business, it will do so slowly enough that other rivals could catch up.

Yahoo and Google say they are still working out how the deal will be implemented and have declined to discuss specifics. Some of these pro-competition clauses may already exist in the agreement. It's also possible that if they're not written into Google's partnership with Yahoo now, they will be by the time the Justice Dept. has anything to say about it.

Holahan is a writer for BusinessWeek.com in New York.