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State AGs Open Look Into Google-Yahoo Ad Deal

Latest Scrutiny Comes on Heels of Congressional Hearings

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WASHINGTON (AdAge.com) -- Several state attorneys general have started their own examination of Google's deal to supply search ads to Yahoo even as a congressional committee in the Senate and House hold hearings tomorrow to examine the potential antitrust implications of the deal.

Spokesmen for state attorneys general in Connecticut and Florida confirmed today the examinations are under way, though in Florida the examination appears to be preliminary. The Washington Post over the weekend reported that up to a dozen states are looking at the Google-Yahoo ad deal.

First hearing
The first hearing tomorrow will be held by the Senate Judiciary Committee's Antitrust, Competition Policy and Consumer Rights panel, followed in the afternoon by a hearing of the House Judiciary Committee's antitrust panel. thje panels will focus on whether the deal could give Google too much power in search-engine marketing.

"We will closely examine the joint venture," Sen. Herb Kohl, D-Wis., chair of the Senate panel, said. "This collaboration between two technology giants and direct competitors for internet advertising and search services raises important competition concerns," he said at the time. The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further."

Besides the testimony of Google and Yahoo executives, the House is to hear a Microsoft executive and representatives from Askthebuilder.com and from AT&T's Yellowpages.com. David Sable, vice chairman-chief operating officer of Wunderman, is also expected to testify. Microsoft has said the deal could give Google further dominance in search-word marketing, and could potentially push up the cost of the ads to advertisers. (Microsoft, of course, has also been trying, so far unsuccessfully, to acquire Yahoo.)

Google and Yahoo deny that their nonexclusive deal would have that effect and they note that while Google will supply some of Yahoo's search engine ads, Yahoo will still sell its own ads.

Google's testimony
In prepared testimony for tomorrow's hearing, David Drummond, Google's senior VP-corporate development and chief legal officer, called the internet an "extraordinary competitive environment where competition is only a click away" and contends the agreement will result in users get "better, more interesting ads" while increasing the efficiency of advertisers messages and bettering competition.

"While there are other threats to the continued competitiveness of the internet, the online advertising marketplace is competitive robust and dynamic," he said in the testimony. He added the nonexclusive deal with Yahoo "creates new efficiencies" and expands the pie, "benefitting users, advertisers and publishers while protecting privacy and spurring innovation."

A source close to Yahoo said that just as the company as reached out to the Justice Department, it has made overtures to state regulators and the discussions are continuing. "We are confident that the arrangement is beneficial to competition, but it would be inappropriate to discuss the details of the process,"

Neither AT&T nor Askthebuilder officials returned requests for comment about what they will say at the hearing. Microsoft declined to provide a copy of its testimony in advance of the hearings.
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