Microsoft, Yahoo! search deal gets competition law go-ahead

Microsoft and Yahoo! have been given permission to embark on asearch engine deal announced seven months ago. European Competitionlaw regulators have said the deal will not damage the Europeansearch engine market.

Microsoft will take over the operation of Yahoo!'s search enginebusiness and keep 12% of search revenues under the agreement, whileYahoo! will receive the other 88% of earnings and offload many ofthe costs of operating a search system.

"The European Commission has approved under the EU MergerRegulation the proposed acquisition of the internet search andsearch advertising businesses of Yahoo! Inc. by Microsoft," said astatement by the European Commission. "The Commission concludedthat the concentration would not significantly impede effectivecompetition in the European Economic Area (EEA) or any substantialpart of it."

The Commission said that the fact that Yahoo! and Microsoft'sBing search engine lag so far behind Google in the search market inEurope worked in the deal's favour.

"In the EEA, Microsoft's and Yahoo's activities in internetsearch and online search advertising are very limited with combinedmarket shares generally below 10%. Google, by contrast, generallyenjoys market shares above 90%," it said.

"The Commission also examined the potential impact of the mergeron the different market players, namely internet search users,advertisers, online publishers and distributors of searchtechnology," said the Commission. "The Commission's first phasemarket investigation has shown that not only market participants donot expect the transaction to have any negative effects oncompetition or on their business but they also expect it toincrease competition in internet search and search advertising byallowing Microsoft to become a stronger competitor to Google."

In a joint statement Microsoft and Yahoo! said that the deal hadalso received competition law clearance from the US Department ofJustice.

“I believe that together, Microsoft and Yahoo! will promote morechoice, better value and greater innovation to our customers aswell as to advertisers and publishers," said Microsoft chiefexecutive Steve Ballmer.

“This breakthrough search alliance means Yahoo! can focus evenmore on our own innovative search experience,” said Yahoo! chiefexecutive Carol Bartz. “Yahoo! gets to do what we do best: combineour science and technology with compelling content to buildpersonally relevant online experiences for our users andcustomers.”

The deal may not take effect in the European Union until 2012.The companies said they hoped to make the search technologytransition in the US by the end of this year, with advertisersmoved over to the new system in early 2011. They said it could be2012 before advertisers outside the US are moved to the newsystem.

Microsoft has said that it hopes that the access the deal willgive to more users of Yahoo!'s search engine technology will helpto improve the usefulness of its own search system, which wasrebranded as Bing last year.