DOJ opens formal probe into Google/Yahoo deal

All bets are off now as Google's search ad partnership with Yahoo is being formally scrutinized by the Justice Department, according to an article in today's Washington Post. While Google and Yahoo had agreed to forestall the deal until the DOJ finished a voluntary review, the formal investigation is a red flag that signals serious antitrust concerns on the part of the DOJ. Here's what one expert quoted in the article says:

"It doesn't mean they have drawn any conclusions," said Peter Guryan, a partner with Fried Frank and formerly an antitrust lawyer in the Justice Department. But "it is a significant step beyond a request for voluntary information," he said. "It demonstrates that the DOJ clearly has questions."

The deal, announced on June 12, would give Google the ability to place search ads alongside Yahoo search results. While Google maintains that such a capability is good for consumers and advertisers because it provides more targeted advertising along with search results, and it would likely infuse Yahoo with an annual $800 million in much needed cash, critics say the deal only weakens Yahoo and strengthens Google's monopoly on search advertising.

Whatever the outcome, Microsoft, the No. 3 player in search whose purchase of Yahoo was recently rebuffed, must be smiling--at least for now. In fact, the Wall St. Journal reported today that Microsoft is renewing its search for partners--including big media names like News Corp. and Time Warner--to help in its Yahoo takeover bid. So far, no takers, but the deal is anything but dead.