While the Google – Yahoo partnership is still under the
Department of Justice scrutiny, the American Antitrust Institute released some
pros and cons regarding the matter, as well as some solutions that would solve
the anticompetitive dangers, while keeping the benefits that would result from
such a deal.
In an Antitrust White Paper signed by Norman Hawker, AAI
suggests that we should be looking at this matter from the competition point of
view, by asking ourselves some basic questions: How will this deal affect
competition? Will this strengthen Google’s already near-monopoly position? Or
will they be able to maintain a level of competition, by putting Yahoo in the
position of better competing with wealthier rivals? The ultimate question would
be: “Will this transaction lead to the demise – or the resuscitation of Yahoo?”
The white paper is intended to show both bad and good sides
to the deal, and it makes recommendations for regulators to work out a way of
facilitating the beneficial effects of such an alliance, while eliminating the
anticompetitive risks.
“The procompetitive potential of the arrangement depends on
Yahoo remaining in paid search,” said Hawker, who is a Senior Fellow of the AAI
and Professor at Western Michigan University. “The government cannot compel Yahoo
to do this; however, the government can insist on legally enforceable
requirements that will ensure that Yahoo has an incentive to continue to
develop.”
According to the paper, the government should prioritize
keeping Yahoo as a viable competitor on the market, so as to avoid the loss of
a competitor on the “extraordinary concentrated market” we have today. Furthermore,
the paper also suggests that although there are no guarantees, and the
agreement might not generate procompetitive efficiencies, there is also no
proof that the parties will engage in anticompetitive conduct.
Despite the fact that the Google – Yahoo partnership is not
a merger, the prospects of such a deal resulted in serious concerns on whether
this will lead in time to Google making a full or partial acquisition of Yahoo’s
paid search business, the paper writes.
The scenarios that arise from such a deal seem endless at
this point; however, the paper suggests that while the transaction might be
blocked on antitrust grounds, especially based on fears that it could all end
up as a “black hole that swallows up Yahoo,” it is also possible that the deal
will allow Yahoo to protect its core business and perhaps strengthen its
position as a competitor as well.
“Simply prohibiting the agreement between Google and Yahoo
would eliminate the potentially positive effects of the proposal,” Hawker
writes. And while the government cannot compel Yahoo to remain in the paid
search business, it can insist on legally enforceable requirements, as follows:
- Prohibit Yahoo from using Google ads (1) on organic search
results outside North America and (2) on third party web sites.
- Prohibit Google and Yahoo from setting minimum bid or
reserve prices.
- Prohibit Yahoo from using Google ads when Yahoo has a
sufficient number of ads of its own to fill the white space surrounding an
organic search result on Yahoo’s site.
- Require the share of revenue that Yahoo receives from each
click be constant, i.e., that the agreement does not reward Yahoo with a higher
share of revenue for using more Google ads.
AAI stated that “the publicly available data, including the
briefings provided by the Yahoo and Google, do not rebut the concerns that the
alliance as proposed is anticompetitive.”
