Ad trade group opposes Yahoo-Google search deal

Update at 3:03 p.m. PDT, with comments from the attorney general from the state of Connecticut, which is one of the lead states in the multistate antitrust review of the Yahoo-Google deal.

The Association of National Advertisers announced Sunday it sent a letter to the head of the antitrust division of the U.S. Department of Justice, citing its opposition to the controversial Yahoo-Google search advertising deal.

The ANA, a powerful group of more than 400 companies that spend more than $100 billion in marketing and commercial advertising, said it conducted a comprehensive and independent analysis of its members and held in-person discussions with both companies before sending the letter to Thomas Barnett, assistant attorney general for the Justice Department's antitrust division.

In its announcement, the ANA stated:

The letter, authorized by the ANA board, notes that a Google-Yahoo partnership will control 90 percent of search advertising inventory and states ANA's concerns that the partnership will likely diminish competition, increase concentration of market power, limit choices currently available and potentially raise prices to advertisers for high quality, affordable search and advertising.

In issuing the letter, the ANA board, which includes a range of Fortune 500 companies such as Kellogg, The Procter & Gamble, Johnson & Johnson, and Walt Disney, comes at a critical time in the review process by federal and state antitrust regulators.

As previously reported by CNET News, the Justice Department is expected to indicate in the coming weeks whether it will seek to block the proposed search deal and, on a state level, a multistate task force is expected to issue a decision in the fall.

For Yahoo, the nonexclusive deal with Google is viewed as a means for increasing its revenues by $800 million in its first year and bump up its operating cash flow by $250 million to $450 million, when it announced plans for the deal in June.

Under the deal, Google will supply some of its search ads to run on Yahoo's search pages. Yahoo has previously stated that on some of its Yahoo search pages, it has no relevant ads to post and that Google could fill in some of that virtual real estate with its ads. However, Yahoo could also choose to use Google's ads on some of its search pages where it too has its own ads.

When it announced its deal in June, Yahoo and Google said they would wait 100 days before implementing the partnership, in order to give antitrust regulators time to review the deal.

The Justice Department declined to comment whether it has received ANA's letter but noted the investigation into the Yahoo-Google deal is on-going.

Yahoo, in a statement, said it expects the Google deal to yield benefits to advertisers:

We are disappointed with the ANA Board's position regarding Yahoo!'s non-exclusive search marketing agreement with Google. Yahoo! remains steadfast in its belief that this deal--in which prices are determined by advertiser demand-driven auctions, and not by collaboration between Yahoo! and Google--will strengthen Yahoo!'s competitive position in online advertising and will help to drive a more robust, higher quality Yahoo! marketplace for our advertisers.

Other advertisers have previously come out in support of the proposed deal, such as Tim Carter, founder of AsktheBuilder.com, who testified before Congress in support of the deal. Last July, the U.S. Senate Judiciary Committee held a hearing titled "The Google-Yahoo agreement and the future of Internet Advertising."

Although various legislators have weighed in on the Yahoo-Google partnership, ultimately, it is the federal and state antitrust regulators who have the power to potentially block the deal by filing a lawsuit.

While advertisers, either on an individual basis, or now as a group, are weighing in on both sides of the issue, the impact of their statements on the antitrust regulatory review process has yet to be seen.

When asked whether a trade group carries more weight in the states' review of the Yahoo-Google partnership, rather than a collection of individual advertisers, Richard Blumenthal, Connecticut's attorney general for the state of Connecticut, which is one of the lead states in the multistate task force examining the proposed partnership, said:

The factual and legal merits and the anti-competitive effects of any practice will determine what the states will do.

The idea for the partnership first arose during Microsoft's unsolicited buyout bid for Yahoo, which brought pressure on the Internet search pioneer to show it could be just as valuable as a stand alone company. And although Microsoft has long since withdrawn its $33 a share buyout bid for Yahoo, the two Internet search companies are continuing with its efforts to move the partnership forward.